The Securities & Exchange Commission today charged Richard Heart (aka Richard Schueler) & three unincorporated entities that he controls, Hex, PulseChain, & PulseX, with conducting unregistered offerings of crypto asset securities that raised more than $1 billion in crypto assets from investors. The SEC also charged Heart & PulseChain with fraud for misappropriating at least $12 million of offering proceeds to purchase luxury goods including sports cars, watches, & a 555-carat black diamond known as ‘The Enigma’ – reportedly the largest black diamond in the world.
According to the SEC’s complaint, Heart began marketing Hex in 2018, claiming it was the first high-yield “blockchain certificate of deposit,” & began promoting Hex tokens as an investment designed to make people “rich.” From at least December 2019 through November 2020, Heart & Hex allegedly offered & sold Hex tokens in an unregistered offering, collecting more than 2.3 million Ethereum (ETH), including through so-called “recycling” transactions that enabled Heart to surreptitiously gain control of more Hex tokens. The complaint also alleges that, between at least July 2021 & March 2022, Heart orchestrated two additional unregistered crypto asset security offerings that each raised hundreds of millions of dollars more in crypto assets. As alleged, those funds were intended to support development of a supposed crypto asset network, PulseChain, & a claimed crypto asset trading platform, PulseX, through the offerings of their native tokens, respectively, PLS & PLSX. Heart also allegedly designed & marketed a so-called “staking” feature for Hex tokens, which he claimed would deliver returns as high as 38 percent. The complaint further alleges that Heart attempted to evade securities laws by calling on investors to “sacrifice” (instead of “invest”) their crypto assets in exchange for PLS & PLSX tokens.
“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,” said Eric Werner, Director of the Fort Worth Regional Office. “This action seeks to protect the investing public & hold Heart accountable for his actions.”
The SEC’s complaint, filed in U.S. District Court for the Eastern District of New York, alleges that Heart, Hex, PulseChain, & PulseX violated the registration provisions of Section 5 of the Securities Act of 1933. The complaint also alleges that Heart & PulseChain violated the antifraud provisions of the federal securities laws. The complaint seeks injunctive relief, disgorgement of ill-gotten gains plus prejudgment interest, penalties, & other equitable relief.
The SEC’s continuing investigation is being conducted by Jaime Marinaro & Derek Kleinmann of the Fort Worth Regional Office, with assistance from Jamie Haussecker. The investigation is supervised by Sarah S. Mallett & Eric Werner of the Fort Worth Regional Office & by Jorge G. Tenreiro & David Hirsch of the Crypto Assets & Cyber Unit. The litigation will be conducted by Matthew J. Gulde & supervised by B. David Fraser.
If you are an investor in Hex, PulseChain, or PulseX, or if you have information related to this investigation & you wish to contact the SEC staff, please submit a tip at SEC.gov | Report Suspected Securities Fraud or Wrongdoing.