Understanding Affinity Fraud
Affinity fraud occurs when individuals place undue trust in someone offering investment opportunities due to perceived commonalities, such as family ties, religious affiliation, or shared interests. Scammers exploit these connections to build trust and ultimately deceive victims into losing their money.
The Case of Eli and Kaitlyn Regalado
In 2024, civil fraud charges were filed against Colorado Pastor Eli Regalado and his wife, who developed a cryptocurrency named INDXcoin. They marketed it to members of their online church, Victorious Grace, claiming divine inspiration and promising substantial financial returns from January 2022 to July 2023.
False Promises and Misleading Claims
Regalado promoted the cryptocurrency on YouTube, asserting that it was a safe investment inspired by God. However, reality contradicted these claims. According to Denver District Attorney John Walsh, 1.3 million dollars from about 300 investors was used to fund the Regalados’ lavish lifestyle, including home renovations and luxury items.
Misrepresentation of INDXcoin
The couple described INDXcoin as a stable and secure cryptocurrency, highlighting a cybersecurity audit that, in reality, rated it a 0 out of 10 and labeled it “catastrophically technologically deficient.” Investors could only buy or sell INDXcoin on the Kingdom Wealth Exchange, which the Regalados closed in November 2023, leaving investors with worthless coins.
Legal Proceedings
Both Eli and Kaitlyn Regalado represented themselves during their civil trial in May 2024, presided over by Judge Heidi Kutcher, who has yet to announce a ruling. The Regalados also face forty criminal charges, including racketeering and securities fraud, arising from the same scheme.
Lessons Learned
This case underscores the importance of thorough background checks before investing. Utilizing resources like the Financial Industry Regulatory Authority’s Central Registration Depository can verify whether a broker is licensed and if there are any disciplinary actions against them. Checking state securities regulation offices is equally vital.
Be Cautious with Cryptocurrency Investments
It is crucial to fully understand any cryptocurrency investment before proceeding, as many scams employ complicated language to confuse potential investors. Visit the SEC’s investor education website at www.investor.gov for additional guidance. Ultimately, avoid investing based solely on shared heritage, nationality, or religion with the advisor.
