In its latest crackdown on crypto exchanges in the United States, the Securities and Exchange Commission (SEC) has charged Hex’s Founder, Richard Heart, also known as Richard Schueler, with raising over $1 billion through ‘unregistered offerings of crypto asset securities’. The US securities watchdog filed the charges in a district court in New York.

SEC Alleges Misappropriation

According to the SEC, Heart raised the funds through Hex, which is an entity he marketed as offering the first high-yield ‘blockchain certificate of deposit’, starting in 2018. He also allegedly obtained the funds for the development of PulseChain, a supposed crypto asset network, and PulseX, the network’s crypto asset trading platform.

The SEC claimed that all three firms are unincorporated entities controlled by Heart. Through the entities, the Hex Founder allegedly offered investors the exchange of their digital assets for PLS and PLSX, the native tokens of PulseChain and PulseX.

“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 SEC explained in a statement. “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.”

Furthermore, the SEC claimed that Heart and PulseChain misappropriated at least $12 million of investor funds. Heart allegedly spent the amount on luxury items, such as sports, cars, and watches. He also purchased “a 555-carat black diamond known as ‘The Enigma’ – reportedly the largest black diamond in the world,” the financial markets supervisor added.

Additionally, the SEC maintained that Heart designed and promoted a so-called ‘staking’ feature for Hex tokens, claiming that they will deliver up to 38% in returns. And, as part of an attempt to evade US securities law, Heart allegedly called on investors to ‘sacrifice’ instead of ‘invest’ their crypto assets in exchange for PLS and PLSX.

“[SEC’s] action seeks to protect the investing public and hold Heart accountable for his actions,” Eric Werner, the Director of the SEC's Fort Worth Regional Office, stated in the statement.

War against Crypto Exchanges

The SEC’s action against Heart and his companies follows the regulator’s ongoing legal battle against Binance, the world’s largest crypto exchange, and Coinbase, the biggest digital asset trading platform in the United States. The watchdog claimed that both platforms are unregistered and offer crypto asset securities. In addition, SEC accused Binance of commingling clients’ funds with company resources.

However, earlier this month, digital asset firm, Ripple secured a partial victory against the regulator after a US court ruled that XRP’s token sale to retail investors on public exchanges did not violate the country’s securities law, Finance Magnates reported.

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