SEC files complaint against Hex founder for allegedly offering unregistered securities

According to the SEC, Richard Heart allegedly used more than $12 million of investor funds to buy “a 555-carat diamond, expensive watches, and high-end automobiles.”

The United States Securities and Exchange (SEC) has filed a lawsuit against Richard Schueler, better known in the crypto space as Richard Heart, for alleged unregistered offerings of three tokens. 

In a July 31 filing in U.S. District Court for the Eastern District of New York, the SEC claimed Heart had raised more than $1 billion through “the unregistered offer and sale of crypto asset securities”, which included HEX, PulseChain (PLS), and PulseX (PSLX). According to the complaint, Heart touted the tokens “as a pathway to grandiose wealth for investors”, hiring developers to maintain the framework behind the crypto assets.

The SEC alleged Heart violated federal securities laws and defrauded retail investors both in the U.S. and abroad. Many of the allegations focused on the HEX founder promising large returns for investors in exchange for hundreds of millions of dollars in deposits. For example, he allegedly accepted more than 2.3 million Ether (ETH) between December 2019 and November 2020 — worth roughly $678 million at the time — in exchange for HEX tokens, $354 million in exchange for the promise of future delivery of PLS tokens, and $676 million in exchange for the promise of future delivery of PLSX tokens.

“Heart and PulseChain defrauded investors by misappropriating at least $12.1 million of PulseChain investor funds,” said the complaint. “Instead of using these investor funds to develop and market the PulseChain network, or even to fulfill Heart’s explicit statement that invested funds supported ‘freedom of speech’ Heart and PulseChain used at least $12.1 million of investor funds for Heart’s personal luxury purchases, including a 555-carat diamond, expensive watches, and high-end automobiles.”

Today we charged Richard Heart (aka Richard Schueler) and three unincorporated entities that he controls, Hex, PulseChain, and PulseX, with conducting unregistered offerings of crypto asset securities that raised more than $1 billion in crypto assets from investors.

— U.S. Securities and Exchange Commission (@SECGov) July 31, 2023

The U.S. regulator said it was seeking permanent injunctive relief, disgorgement, prejudgment interest, and civil penalties against Heart and the projects. Heart, who resides in Finland, was subject to a civil summons requiring him or his legal team to respond to the SEC complaint within 21 days or risk default judgment.

The civil action by the SEC was the latest in what many critics have called a “regulation by enforcement” approach to crypto in the United States. The federal regulator has ongoing cases against crypto exchanges Coinbase and Binance, among others, for similar allegations of unregistered securities offerings.

Related: SEC issues subpoena to influencers promoting HEX, Pulsechain and PulseX

Many in the crypto space viewed HEX with skepticism despite the price of the token often making significant gains, surging in 2021 to reach an all-time high of roughly $0.48. Immediately following news of the SEC lawsuit, the price dropped more than 26% from roughly $0.0084 to $0.0062.

Following scrutiny from the SEC, many reported that Heart seemed to be removing certain references to Hex, PulseChain and PulseX from his social media posts and profiles. According to his X bio, Heart “doesn’t read messages, email, newspapers, magazines, letters, communication of any form or listen to the radio or nearly anything else”.

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