SEC Slams Lawsuit Against Richard Heart for Alleged Sale of Unregistered Securities and Fraud

The US Securities and Exchange Commission (SEC) has sued the controversial crypto entrepreneur Richard Schueler, popularly known within the crypto community as Richard Heart, along with three of his entities, for allegedly engaging in unregistered securities sales and fraudulent activities.

Heart purportedly used investors’ money to create a luxury lifestyle for himself, buying expensive items, including the purchase of the world’s largest polished black diamond.

Heart Asked Investors to “Sacrifice” Their Crypto?

In a court document on Monday (July 31, 2023), the SEC claimed that Richard Heart conducted an unregistered sale of cryptocurrency securities that raised more than $1 billion. The regulator also listed three entities under Heart’s control — Hex, PulseChain, and PulseX — in the lawsuit while labeling them crypto asset securities.

According to the complaint, Heart marketed Hex as the “first high-yield Blockchain Certificate of Deposit” on the Ethereum network. The SEC also referred to Heart’s numerous YouTube live streams where he talked about the Hex staking program, which he claimed could give investors an annual return of 38% in more HEX tokens.

The securities regulator further claimed that Heart offered several incentives to get investors to make more investments, promising that they would become rich. The tactic seemed successful, as the crypto entrepreneur received more than 2.3 million ETH deposits during the Hex offering.

Heart further asked participants to invest their crypto assets in PulseChain offering, which he referred to as “sacrificing,” in exchange for PLS tokens to be delivered in the future. The venture raised $354 million worth of cryptocurrency, with the SEC stating that Heart did not register the PulseChain offering with the regulatory watchdog.

However, the SEC alleged that Heart misused funds generated through the PulseChain offering, supposedly sending $217 million from the proceeds to a private wallet.

Also, Heart and PulseChain misappropriated “at least $12.1 million of PulseChain investor funds,” which he used to buy luxury items such as expensive watches and automobiles, and a 555-carat diamond called “The Enigma,” the world’s largest polished black diamond.

Crypto Community Applauds SEC’s Action

The agency is charging Heart and PulseChain with “fraud in connection with the purchase or sale of a security,” “fraud in the offer of a sale or security,” and “securities registration violation” against Heart, Hex, PulseChain, and PulseX.

According to a statement from the SEC Fort Worth regional office Eric Werner:

“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 action seeks to protect the investing public and hold Heart accountable for his actions.”

Meanwhile, unlike other lawsuits by the SEC against cryptocurrency companies and individuals, the majority of the community seems to applaud the regulator’s actions, with some stating that the lawsuit is coming late for Hex investors.