The Securities and Exchange Commission (SEC) has detailed charges against an individual and three unincorporated entities for allegedly conducting unregistered offerings of crypto asset securities.
The SEC indicated the charges are against Richard Heart (aka Richard Schueler) and three unincorporated entities that he controls – Hex, PulseChain and PulseX.
The SEC alleged in its complaint the unregistered offerings of crypto asset securities raised more than $1 billion in crypto assets from investors. The agency also charged Heart and PulseChain with fraud for allegedly misappropriating at least $12 million of offering proceeds to purchase luxury goods.
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, the SEC alleged, 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 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.
The SEC complaint further alleges Heart attempted to evade securities laws by calling on investors to sacrifice, instead of invest, 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,” SEC Fort Worth Regional Office Director Eric Werner said. “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.”