SEC Charged HEX’s Founder

The Securities and Exchange Commission (SEC) in the United States has escalated its crackdown on crypto exchanges, with charges being filed against Richard Heart, also known as Richard Schueler, the Founder of Hex, for allegedly raising more than $1 billion through unregistered offerings of crypto asset securities. The charges were brought before a New York district court.

According to the SEC, Heart initiated the fundraising for Hex in 2018, marketing it as the first high-yield “blockchain certificate of deposit.” He is also accused of raising funds for PulseChain, an alleged crypto asset network, and PulseX, the associated crypto asset trading platform.

The SEC asserts that all three entities, Hex, PulseChain, and PulseX, are under Heart's control. He is accused of offering investors the exchange of their digital assets for PLS and PLSX, the native tokens of PulseChain and PulseX.

The complaint claims that from December 2019 to November 2020, Heart and Hex conducted an unregistered offering of Hex tokens, collecting over 2.3 million Ethereum (ETH), including through “recycling” transactions that allowed Heart to gain control of more Hex tokens secretly. The SEC also alleges that between July 2021 and March 2022, Heart orchestrated two additional unregistered crypto asset security offerings, raising hundreds of millions of dollars more in crypto assets.

Furthermore, the SEC accuses Heart and PulseChain of misappropriating at least $12 million of investor funds, which Heart reportedly spent on luxury items such as sports cars, watches, and even a 555-carat black diamond known as “The Enigma,” reputedly the world's largest black diamond.

Heart also promoted a “staking” feature for Hex tokens, claiming they would provide returns of up to 38%. Additionally, in an attempt to evade US securities law, Heart allegedly urged investors to “sacrifice” their crypto assets instead of “investing” them in exchange for PLS and PLSX.

Eric Werner, Director of the SEC's Fort Worth Regional Office, stated that the action seeks to protect investors and hold Heart accountable for his actions.

The SEC's actions against Heart and his companies are part of its ongoing legal battle against Binance and Coinbase, two major crypto platforms accused of offering unregistered crypto asset securities. The SEC also accused Binance of mixing client funds with company resources.

In contrast, Ripple, a digital asset firm, secured a partial victory against the SEC earlier this month when a US court ruled that the token sale of XRP to retail investors on public exchanges did not violate US securities law.