In a major crackdown on illicit activities in the world of digital finance, the Securities and Exchange Commission (SEC) has levied charges against crypto entrepreneur Richard Heart, whose real name is Richard Schueler. Heart, alongside three entities under his control – Hex, PulseChain, and PulseX – is accused of conducting unregistered offerings of crypto asset securities, amassing more than $1 billion from investors.
Furthermore, Heart and PulseChain have been charged with fraud for allegedly misappropriating at least $12 million from the raised funds to acquire luxury goods, such as sports cars, expensive watches, and a 555-carat black diamond, ‘The Enigma,’ which is reportedly the world’s largest black diamond.
The SEC complaint states that Heart initiated the marketing of Hex in 2018, branding it as the first high-yield “blockchain certificate of deposit.” He promoted Hex tokens as an investment instrument designed to make people “rich.” From December 2019 through November 2020, Heart and Hex allegedly conducted an unregistered offering of Hex tokens, gathering over 2.3 million Ethereum (ETH).
The complaint details that Heart orchestrated two additional unregistered crypto asset security offerings from July 2021 to March 2022. These offerings raised hundreds of millions of dollars more in crypto assets, supposedly aimed at the development of a crypto asset network, PulseChain, and a purported crypto asset trading platform, PulseX. Their native tokens, PLS and PLSX, were offered in return. Additionally, Heart designed a so-called “staking” feature for Hex tokens, promising returns as high as 38 percent.
Eric Werner, Director of the Fort Worth Regional Office, commented, “Heart called on investors to buy crypto asset securities in offerings that he failed to register. He then defrauded those investors by spending some of their crypto assets on exorbitant luxury goods.”
The complaint filed in the U.S. District Court for the Eastern District of New York alleges that Heart, Hex, PulseChain, and PulseX violated the registration provisions of Section 5 of the Securities Act of 1933, along with Heart and PulseChain violating the antifraud provisions of federal securities laws. The SEC seeks injunctive relief, disgorgement of ill-gotten gains plus prejudgment interest, penalties, and other equitable relief.
The SEC’s continuing investigation is being led by the Fort Worth Regional Office and the Crypto Assets and Cyber Unit.
