SEC Sues Hex Founder for Violation of Securities Laws
The SEC files a lawsuit against Richard Schueler (Richard Heart) for conducting unregistered offerings of HEX, PulseChain, and PulseX tokens.
Key Points
- SEC files lawsuit against Richard Schueler (Richard Heart) for unregistered offerings of HEX, PulseChain, and PulseX tokens, alleging over $1 billion raised since 2019.
- Heart marketed HEX as a high-yield “blockchain certificate of deposit,” allegedly defrauding investors and misusing funds for personal luxuries.
- SEC seeks injunctive relief, disgorgement, interest, and penalties against Heart and the projects, as tokens’ values significantly depreciated.
- Lawsuit reflects SEC’s enforcement approach to regulate the crypto industry in the U.S., with ongoing cases against Coinbase and Binance for similar allegations.
The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Richard Schueler, also known as Richard Heart in the crypto industry, for conducting unregistered offerings of three tokens: HEX, PulseChain, and PulseX. The SEC alleges that Heart raised over $1 billion through these unregistered offerings, starting in 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
SEC Taking Action
The SEC’s complaint, filed on July 31 in the U.S. District Court for the Eastern District of New York, accuses Heart of violating federal securities laws. The complaint states that Heart marketed Hex as the first high-yield “blockchain certificate of deposit” in 2018 and promoted Hex tokens as a lucrative investment opportunity.
The SEC claims that Heart defrauded investors in the U.S. and abroad and used the funds for personal luxuries. For example, the SEC alleges that Heart misappropriated approximately $12.1 million of PulseChain investor funds to purchase expensive items like a 555-carat diamond, luxury watches, and high-end cars.
Heart had boasted about Hex, claiming it was designed to be the highest appreciating asset in history. He frequently made bold statements during his YouTube live streams, such as “If you want to get rich, Hex is built for that.” Heart also claimed that Hex would outperform Ethereum, Bitcoin, and other cryptocurrencies.
The SEC’s lawsuit points out that Hex, PulseCoin, and PulseX have all experienced significant price depreciation. The filing states that PulseCoin and PulseX are practically worthless, and Hex’s value has dropped by about 98.4% from its all-time high.
Concluding Thoughts
The SEC is seeking permanent injunctive relief, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties against Heart and the projects. Heart, who currently resides in Finland but was born in the U.S., has been issued a civil summons demanding a response to the SEC lawsuit within 21 days, or he risks default judgment.
This lawsuit is part of the SEC’s enforcement approach to regulate the cryptocurrency industry in the United States. The agency has ongoing lawsuits against prominent digital asset exchanges Coinbase and Binance, as well as other industry leaders, for similar allegations of conducting unregistered securities offerings.
