SEC Sues Hex Founder Richard Heart For Alleged Fraud, Says He Used Gains to Buy Sports Cars, Black Diamond

Updated: 01 August 2023

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The U.S. Securities and Exchange Commission (SEC) has charged Hex founder Richard Schueler, best known as Richard Heart, for conducting unregistered offerings of crypto asset securities.

These offerings, conducted through his three unincorporated entities, Hex, PulseChain, and PulseX, have raised more than $1 billion since 2019.

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 SEC further accused Heart of defrauding investors by using their funds for personal luxuries. According to the SEC, he siphoned off millions of dollars raised through these crypto offerings, diverting the assets to fuel an extravagant lifestyle.

Heart and his platform PulseChain were also charged with fraud for misappropriating at least $12 million of the raised funds to buy expensive sports cars, watches, and a unique black diamond named ‘The Enigma’.

Hex Faced Skepticism Since Inception

Hex, launched in 2019, along with the more recent entities, PulseChain and PulseX, were the platforms through which Heart conducted these fraudulent actions. Hex has faced skepticism since its inception, with not much credibility in the crypto market. In fact, The SEC alleged that Heart positioned Hex as the first high-yield “Blockchain Certificate of Deposit” launched on the Ethereum network that could garner upto 38% interest on investment.

PulseChain and PulseX, on the other hand, were recently launched. However, both platforms faced immediate issues upon their launch, including high fees, and liquidity problems, among others.

In its lawsuit, the SEC also alleged that Heart attempted to bypass security laws by compelling investors to give away their existing crypto asset holdings in exchange for PLS and PLSX, the native tokens of PulseChain and PulseX, respectively.

The SEC further stated, “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 confirmed that Sarah S. Mallett and Eric Werner of the Fort Worth Regional Office, and Jorge G. Tenreiro and David Hirsch of the Crypto Assets and Cyber Unit are supervising the ongoing investigation.

The SEC’s action against Heart and his associated entities represents a stern warning to others in the crypto space. It serves as a reminder that regulatory oversight of the crypto industry is gradually increasing. The US regulatory body has recently been in the news for its hunt down on several crypto-staking firms in the US.

Commenting on the lawsuit, Eric Werner, Director of the Fort Worth Regional Office, said “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.”

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