Scam with Memphis tie was a case of ‘affinity fraud’

A Colorado pastor and his wife, Eligio “Eli” Regalado and his wife Kaitlyn Regalado, are facing fraud charges for allegedly running a cryptocurrency scheme that cheated more than 300 of his parishioners out of $3.2 million.

Part of his marketing pitch was “The Lord said: I want you to build this.” When the scheme started to unravel, he said, “Either I misheard God, and every one of you who prayed and came in – you as well. Or two, God is still not done with this project.”

The pastor had no prior experience in the financial or crypto sectors. The legal complaint against him and his wife says they spent much of the money on maintaining a lavish lifestyle, including remodeling their home and buying a Range Rover, luxury handbags and jewelry.

The Colorado Securities Commissioner said the pastor “…took advantage of the trust and faith of his own Christian community and that he peddled outlandish promises of wealth to them when he sold them essentially worthless cryptocurrencies.”

This is an example of a faith-based scam.

Arrest of a Memphis woman

A notorious case that operated in Memphis and nationwide called the Miracle Cars scam involved crooks recruiting ministers to promote the sale of cars from the collection of a recently deceased business tycoon.

He supposedly wanted them to be sold at low prices to the faithful. There were no cars, church members lost over $20 million, and several of the ringleaders went to jail; one was a Memphis woman.

The U.S. Attorney thanked our BBB for assisting in the investigation.

Faith-based scams are a subset of “affinity fraud,” which the Securities and Exchange Commission (SEC) says targets members of identifiable groups, such as religious or ethnic communities, the elderly, racial minorities or professional groups. It exploits the trust and friendship between people who have something in common.

Other recent examples of affinity fraud include:

h A pyramid scheme selling cloud computing services that took in more than $65 million from primarily Asian and Latino investors.

h A real estate investment scheme that stole $5.9 million from members of the African American community in Jacksonville, Florida.

h Perhaps the saddest, a scheme that defrauded Gold Star Family Members out of life insurance and other benefits following the death of an active duty service member.

Tips to avoid affinity fraud scam

The SEC and BBB offer the following advice to avoid becoming the victim of affinity fraud:

h Just because someone belongs to your church, club or business association, or is of the same cultural or ethnic background, isn’t grounds for blind trust.

h Check out the deal just as you would any investment. It’s extremely unlikely that a great investment opportunity would only be available to a particular religious faith or ethnic group.

h Ignore claims that religiously based investments aren’t regulated. Virtually all investment opportunities come under the scope of federal and state securities or commodities laws.

h Check out the promoter and opportunity before money changes hands. Contact your state securities agency to find out if the promoter and an investment are properly registered in your state.

h Don’t assume that an email or other communication from a pastor or another respected community leader about a great investment opportunity really came from that person. Or even if it’s real, that the sender isn’t an unwitting victim of fraud.

h Promises of high returns with little or no risk are classic signs of fraud.

Randy Hutchinson is president & CEO Better Business Bureau of the Mid-south.