The Securities and Exchange Commission (SEC) has taken legal action against Richard Heart, also known as Richard Schueler, and three unincorporated entities under his control: Hex, PulseChain, and PulseX. The charges involve conducting unregistered offerings of crypto asset securities that raised over $1 billion in crypto assets from investors. Additionally, Heart and PulseChain are accused of committing fraud by misusing at least $12 million of the offering proceeds to purchase luxury items, including sports cars, watches, and a massive 555-carat black diamond known as ‘The Enigma,’ reputedly the world’s largest black diamond.
The SEC’s complaint states that Heart began marketing Hex as the first high-yield “blockchain certificate of deposit” in 2018, positioning Hex tokens as an investment that could make people wealthy. From December 2019 to November 2020, Heart and Hex allegedly conducted an unregistered offering, collecting over 2.3 million Ethereum (ETH), including through “recycling” transactions to secretly gain control of more Hex tokens. Furthermore, between July 2021 and March 2022, Heart allegedly orchestrated two more unregistered crypto asset security offerings, raising hundreds of millions of dollars more in crypto assets. These funds were purportedly intended to support the development of PulseChain, a crypto asset network, and PulseX, a crypto asset trading platform, through the offerings of their native tokens, PLS and PLSX, respectively. Heart also claimed that Hex tokens had a “staking” feature that could yield returns as high as 38 percent, which the SEC alleges was designed to evade securities laws by using the term “sacrifice” instead of “invest.”
The SEC aims to protect the investing public and hold Heart accountable for his actions. The complaint filed in the U.S. District Court for the Eastern District of New York alleges violations of the registration provisions of the Securities Act of 1933 by Heart, Hex, PulseChain, and PulseX. Additionally, Heart and PulseChain are accused of violating 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 investigation is ongoing and is being carried out by the Fort Worth Regional Office. Investors in Hex, PulseChain, or PulseX, or individuals with information related to the investigation, can contact the SEC staff through SEC.gov | Report.