On July 31, the U.S. Securities and Exchange Commission (SEC) filed suit against Richard Heart, the founder of blockchain projects PulseChain and HEX, for allegedly defrauding investors and selling unregistered crypto securities.
The SEC said in the filing that Heart — whose legal given name is Richard Shueler — operates through three “unincorporated alter-ego entities” in the form of PulseChain, PulseX, and HEX, each with its own native token.
According to the watchdog, each of the three tokens “was, and is, a crypto-asset security.”
Heart is accused of selling these unregistered securities over a period of at least three years to investors both within and without the U.S., raising more than $1 billion in the process.
According to the filings:
“Heart continually touted these investments as a pathway to grandiose wealth for investors, claiming that HEX, for example, ‘was built to be the highest appreciating asset that has ever existed in the history of man.’”
The SEC said in the filing that Heart directly controlled all three projects and was the primary mastermind behind their inception and subsequent sales to investors.
Fraud charges
The SEC is charging Heart and PulseChain with fraud over misappropriating roughly $12 million of investor funds raised from selling unregistered crypto asset securities.
According to the regulator, the money was meant to support the development of the PulseChain and PulseX platforms.
However, Heart spent the misappropriated money on personal luxury expenses, including multiple sports cars, watches, and the world’s largest diamond — a 555-carat black diamond known as “The Enigma” that was rebranded as the “HEX.com diamond.”
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.”
Werner is supervising the SEC investigation into Heart and his various operations.
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