SEC Charges Hex Founder Richard Heart with Misappropriating Millions of Dollars of Investor Funds from Unregistered Crypto Asset Securities Offerings that Raised more than $1 Billion
summary
Richard Heart and his entities Hex, PulseChain, and PulseX were charged by the SEC with conducting unregistered crypto asset security offerings that raised over $1 billion and misappropriating at least $12 million in investor funds for luxury goods.
paragraph
The SEC charged Richard Heart and his entities with conducting unregistered crypto asset security offerings that raised over $1 billion, including more than 2.3 million Ethereum in the initial Hex offering. Heart allegedly misappropriated at least $12 million in investor funds to purchase luxury items, including a 555-carat black diamond, sports cars, and watches. The SEC alleges violations of Section 5 of the Securities Act for unregistered sales and antifraud provisions for deceptive practices.
narrative
The Securities and Exchange Commission (SEC) has charged Richard Heart, also known as Richard Schueler, and his three unincorporated entities, Hex, PulseChain, and PulseX, with conducting unregistered offerings of crypto asset securities that raised more than $1 billion in crypto assets from investors. The SEC alleges that Heart and his entities marketed Hex as a high-yield 'blockchain certificate of deposit' and PulseChain/PulseX tokens as investment vehicles with misleading staking returns of up to 38%. Heart allegedly misappropriated at least $12 million in investor funds to purchase luxury items, including a 555-carat black diamond, sports cars, and watches. The SEC also alleges that Heart used coercive language, such as 'sacrifice,' to evade securities laws. The agency seeks injunctive relief, disgorgement of ill-gotten gains with interest, civil penalties, and other equitable remedies. The investigation, led by the Fort Worth Regional Office and Crypto Assets and Cyber Unit, remains ongoing.
Classified crypto-securities(confidence 95%). EDGAR detection: forms 1-A/S-1/8-K· recall 43% / precision 2%. detection rule →
Statutes
Parties
b. david fraserdavid hirschDerek KleinmannEric WernerHexJaime MarinaroJamie HausseckerJorge G. Tenreiromatthew j. guldePulseChainPulseXRichard HeartRichard Schuelersarah s. mallettSecurities and Exchange CommissionU.S. District Court For The Eastern District Of New York
Keywords
heartcrypto assetcryptohexsecuritiescrypto assetssecassetasset securitiesofferingspulsechaintokensrichard heartmillions dollarsunregistered crypto
Extracted insights
Dollar amounts 2
- $1.00B $1 billion ≥$1B
- $12.00M $12 million $10M–$100M
Entities 16
- person Richard Heart ×2
- person b. david fraser
- person david hirsch
- person Derek Kleinmann
- person Eric Werner
- organization Hex
- person Jaime Marinaro
- person Jamie Haussecker
- person Jorge G. Tenreiro
- person matthew j. gulde
- organization PulseChain
- organization PulseX
- person Richard Schueler
- person sarah s. mallett
- agency Securities and Exchange Commission
- organization U.S. District Court For The Eastern District Of New York
Triples 6
- Securities and Exchange Commission charged Richard Heart and Hex, PulseChain, PulseX with conducting unregistered offerings of crypto asset securities that raised more than $1 billion
- Securities and Exchange Commission charged Richard Heart and PulseChain with fraud for misappropriating at least $12 million of offering proceeds to purchase luxury goods
- Richard Heart began marketing Hex in 2018
- Richard Heart orchestrated two additional unregistered crypto asset security offerings between July 2021 and March 2022 that each raised hundreds of millions of dollars
- Richard Heart designed and marketed a staking feature for Hex tokens that he claimed would deliver returns as high as 38 percent
- Richard Heart called on investors to sacrifice their crypto assets in exchange for PLS and PLSX tokens
Extracted body text (3,417c)
The Securities and Exchange Commission today 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. The SEC also charged Heart and PulseChain with fraud for misappropriating at least $12 million of offering proceeds to purchase luxury goods including sports cars, watches, and 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,” and began promoting Hex tokens as an investment designed to make people “rich.” From at least December 2019 through November 2020, Heart and Hex allegedly offered and 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 and 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, and a claimed crypto asset trading platform, PulseX, through the offerings of their native tokens, respectively, PLS and PLSX. Heart also allegedly designed and 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 and 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 and 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, and PulseX violated the registration provisions of Section 5 of the Securities Act of 1933. The complaint also alleges that Heart and PulseChain violated the antifraud provisions of the federal securities laws. The complaint seeks injunctive relief, disgorgement of ill-gotten gains plus prejudgment interest, penalties, and other equitable relief. The SEC’s continuing investigation is 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 and by Jorge G. Tenreiro and David Hirsch of the Crypto Assets and Cyber Unit. The litigation will be conducted by Matthew J. Gulde and supervised by B. David Fraser. If you are an investor in Hex, PulseChain, or PulseX, or if you have information related to this investigation and you wish to contact the SEC staff, please submit a tip at SEC.gov | Report Suspected Securities Fraud or Wrongdoing.
OCR text (3,417c · html-text · 99% conf)
The Securities and Exchange Commission today 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. The SEC also charged Heart and PulseChain with fraud for misappropriating at least $12 million of offering proceeds to purchase luxury goods including sports cars, watches, and 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,” and began promoting Hex tokens as an investment designed to make people “rich.” From at least December 2019 through November 2020, Heart and Hex allegedly offered and 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 and 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, and a claimed crypto asset trading platform, PulseX, through the offerings of their native tokens, respectively, PLS and PLSX. Heart also allegedly designed and 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 and 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 and 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, and PulseX violated the registration provisions of Section 5 of the Securities Act of 1933. The complaint also alleges that Heart and PulseChain violated the antifraud provisions of the federal securities laws. The complaint seeks injunctive relief, disgorgement of ill-gotten gains plus prejudgment interest, penalties, and other equitable relief. The SEC’s continuing investigation is 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 and by Jorge G. Tenreiro and David Hirsch of the Crypto Assets and Cyber Unit. The litigation will be conducted by Matthew J. Gulde and supervised by B. David Fraser. If you are an investor in Hex, PulseChain, or PulseX, or if you have information related to this investigation and you wish to contact the SEC staff, please submit a tip at SEC.gov | Report Suspected Securities Fraud or Wrongdoing.