SEC Charges Richard Heart for $1B Unregistered Offerings, Hex Token Plummets 25%
The Securities and Exchange Commission (SEC) has brought charges against Richard Heart, also known as Richard Schueler, along with three unincorporated entities under his control, namely Hex, PulseChain, and PulseX. The charges revolve around unregistered offerings of crypto asset securities, which allegedly raised more than $1 billion in crypto assets from unsuspecting investors.
Additionally, Heart and PulseChain are facing fraud charges related to the misappropriation of at least $12 million of the offering proceeds to indulge in luxury purchases, such as sports cars, watches, and a massive 555-carat black diamond known as ‘The Enigma,’ purportedly the largest black diamond in the world.
The impact of these charges on the cryptocurrency market has already been felt, with the HEX token experiencing a significant decline of 25%, dropping to a value of $0.0066, according to Coingecko data.
As a reporter covering this breaking news, it is important to delve into the details of the SEC’s complaint to understand the magnitude of the allegations against Richard Heart and the entities under his control.
The complaint outlines that Richard Heart started marketing Hex in 2018, promoting it as the first high-yield “blockchain certificate of deposit” and touting Hex tokens as a lucrative investment to make people wealthy. However, from December 2019 through November 2020, Heart and Hex are accused of offering and selling Hex tokens in an unregistered offering, raising over 2.3 million Ethereum (ETH). Moreover, the SEC alleges that Heart used so-called “recycling” transactions to gain control of additional Hex tokens surreptitiously.
The SEC further claims that between July 2021 and March 2022, Heart orchestrated two more unregistered offerings of crypto asset securities, each raising hundreds of millions of dollars. These funds were purportedly meant to support the development of two crypto asset-related ventures: PulseChain and PulseX, with their native tokens PLS and PLSX, respectively.
In addition to the unregistered offerings, Heart marketed a “staking” feature for Hex tokens, promising returns as high as 38 percent. However, the SEC contends that these claims were misleading, and Heart attempted to evade securities laws by encouraging investors to “sacrifice” their crypto assets instead of investing them in exchange for PLS and PLSX tokens.
The SEC’s Director of the Fort Worth Regional Office, Eric Werner, has expressed concern over Heart’s actions. He states, “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.” This has resulted in the SEC taking action to protect the investing public and hold Heart accountable for his alleged actions.
The complaint, filed in the U.S. District Court for the Eastern District of New York, accuses Heart, Hex, PulseChain, and PulseX of violating the registration provisions of the Securities Act of 1933. Additionally, it alleges that Heart and PulseChain breached the antifraud provisions of federal securities laws. As a consequence, the SEC is seeking injunctive relief, disgorgement of ill-gotten gains, prejudgment interest, penalties, and other equitable relief.
The SEC’s investigation into this matter is ongoing and being conducted by Jaime Marinaro and Derek Kleinmann of the Fort Worth Regional Office, with assistance from Jamie Haussecker. The investigation is supervised by Sarah S. Mallett and Eric Werner of the Fort Worth Regional Office, along with Jorge G. Tenreiro and David Hirsch of the Crypto Assets and Cyber Unit. The litigation will be conducted by Matthew J. Gulde under the supervision of B. David Fraser.
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