In October 2005, Gangaji's husband, Eli Jaxon-Bear, admitted to Gangaji that he had a three-year affair with an adult female student who was later employed as a teacher in his organization, the Leela Foundation. After a brief separation, Gangaji and Eli reconciled their marriage. At the student’s request, the information about the affair was not made public at that time. In January 2006, Gangaji and Eli merged their foundations, continuing to teach together and separately.
In October 2006, Eli disclosed his extramarital relationship to the Gangaji Foundation Board of Directors and staff. Subsequently, an open letter from Barbara Denempont, Executive Director of the Gangaji Foundation since January 2006, was written to the public. "What was initially seen as a matter between two adults is now recognized to be a betrayal of the teacher/student relationship and an abuse of power," She added,
"The repercussions of this betrayal are reverberating in ways that were never imagined, but are very painful. The deepest truths do not excuse or justify our failures and betrayals as human beings. Gratefully though, without minimizing or spiritualizing the damage done, love remains and sustains all. It is only in love that we can truly meet the pain that comes with being human. Ever more so, we can commit ourselves to the compassion that love provides and to tell the truth more clearly and honestly to others and ourselves."
For a time Eli Jaxon-Bear stopped teaching. Both the Gangaji Foundation and Eli held open meetings with the stated purpose to heal whatever wounds that may have been experienced in their spiritual community. In addition, Gangaji and later Gangaji and Eli together held retreats on the subjects of disillusionment, betrayal, and relationship.
In 2007 Eli was diagnosed with multiple myeloma, a severe form of blood cancer. After undergoing extensive treatment he made a partial recovery. In January 2008, Eli reestablished the Leela Foundation and resumed teaching on his own and with Gangaji