The U.S. Securities and Exchange Commission (SEC) has initiated a lawsuit against Richard Schueler, better known in the crypto world as Richard Heart, for unregistered offerings of three tokens: HEX, PulseChain, and PulseX. The SEC alleges that he raised over $1 billion through the unregistered offerings starting in 2019.
SEC Sues Hex Founder; Another Violation Of Securities Laws
The founder of crypto project Hex has been sued by the U.S. SEC for violation of federal securities laws.
According to a July 31 complaint filed by the SEC in the U.S. District Court for the Eastern District of New York, Richard Heart raised around $1 billion via “the unregistered offer and sale of crypto asset securities”, which included HEX, PulseChain (PLS), and PulseX (PSLX).
“Heart began marketing Hex in 2018, claiming it was the first high-yield ‘blockchain certificate of deposit,’ and began promoting Hex tokens as an investment designed to make people ‘rich,'” the SEC’s lawsuit read.
The American securities watchdog alleged that Heart defrauded investors both in the U.S. and abroad, and used the funds for luxurious personal goods. For instance, the SEC claims Heart misappropriated approximately $12.1 million of PulseChain investor funds to purchase luxury items like a 555-carat diamond, expensive watches, and high-end automobiles.
Heart bragged that Hex was “built to be the highest appreciating asset that has ever existed in the history of man.” The complaint also mentions frequent quotes from Heart’s YouTube live streams, including one in 2019 when he declared: “If you want to get rich, [Hex is] built for that.” He further posited that stated that Hex “was built to outperform Ethereum and Bitcoin and all other cryptocurrencies.'”
The SEC further points out that Heart touted PulseX through his public statements, forecasting that appreciation of “10,000x in two years is well within the realm of possibility.”
Nonetheless, the SEC’s lawsuit notes that Hex, PulseCoin, and PulseX have all seen massive price depreciation.
“At present, PLS and PLSX are practically worthless, and Hex’s value has dropped about 98.4% below its all-time high,” the filing states.
The SEC said it was seeking permanent injunctive relief, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties against Heart and the projects. Heart, who was born in the U.S. but currently lives in Finland, was subject to a civil summons demanding he or his attorneys respond to the SEC lawsuit within 21 days or risk default judgment.
That being said, the suit is a continuation of the agency’s regulation-by-enforcement approach in the United States. The federal regulator is currently embroiled in lawsuits against prominent digital asset exchanges Coinbase and Binance, among other industry leaders, for similar allegations of unregistered securities offerings.