New York, April 26 -- Two Indian restaurants in Colorado have duped investors to the tune of $3,80,000, state regulators have alleged and are now seeking to recover the amount from them.

In a lawsuit, the Colorado Division of Securities has alleged that the owners of Indian restaurants Bombay Clay Oven and Saucy Bombay used "half-truths and lies" to sell investors on their grandiose plans for a nationwide expansion before spending the $380,000 that shareholders invested on rent, operating costs and Ponzi-like payments, a local newspaper reported.

The two restaurants were owned by The Bombay Group (TBG), which entered into an agreement with securities broker Michael Bissonnette.

TBG's plan was to franchise Saucy Bombay in order to capit...