Some time after a new bishop arrived in the central Brazilian city of Formosa in 2015, parishioners started to notice a few changes.

The diocese went from credit to an £18,000 ($23,592) debt, and stopped publishing public accounts. Church funds were used to buy 15 new cars – two of which immediately disappeared – and the cost of running Bishop José Ronaldo Ribeiro’s house spiraled from £920 to £6,400 a month, they alleged.

Amid increasing concern, congregants stopped paying their tithe in protest, although Ribeiro denied any wrongdoing.

Nonetheless, prosecutors opened a criminal investigation and began tapping phones.

And what they found shocked them.

Nearly half a million pounds donated by the faithful for baptisms, marriages, confirmations and donations had been used to buy luxury watches, laptops, cellphones, cattle, a ranch and even a shop selling lottery tickets, according to prosecutors.

On Wednesday the Vatican said it had accepted Bishop Ribeiro’s resignation, two days after he and 10 others – including five priests, a lawyer and an accountant – went on trial on charges including racketeering, money laundering, misrepresentation and embezzlement.

If convicted they face potential sentences of up to 20 years.

“They used church money for their benefit,” said prosecutor Douglas Chegury.

According to court documents, Bishop Ribeiro took money from the diocese, via bank transfers, cheques and cash.

Another of the accused, Father Epitácio Pereira, took £65,000 in 2015 alone and prosecutors found £71,000 in a false floor under his wardrobe along with electronic goods and expensive designer watches during his arrest.

A third priest was found to have £72,000 in his bank account while a fourth bought a lottery shop in the town of Posse in the name of third parties, according to prosecutors.

After the arrests, the Metrópoles news website reported that parishioners in Ribeiro’s previous diocese of Janaúba in Minas Gerais state had complained over his high-handed behaviour and failure to provide accounts, and 19,000 people signed a petition calling for his removal from that post.

Father Cristiano Faria, a specialist in canonical law, said the church’s own investigation will be sent to Rome, and that Ribeiro could be suspended or even lose his status as bishop.

Lucas Rivas, Ribeiro’s lawyer, said: “The charges against him are nothing more than lawfare powered by the ideology of violence and prejudice now dominant in Brazil – at the very time the Catholic Church is globally under attack.”

All of the accused deny the charges. They have also argued that the Brazilian state has no control over church affairs, Chegury said.

Chegury said that Ribeiro played a central role in the crimes, adding that he was “surprised and disappointed” that a bishop should be involved in wrongdoing, given the widespread revulsion over a succession of graft scandals involving powerful Brazilian politicians and business leaders.

“Brazil is going through a very serious and chronic corruption crisis and one of our only hopes is in faith,” said Chegury.