SEC Alleges Hex Founder Richard Heart Illegally Raised $1B, Misappropriated $12M

SEC Alleges Hex Founder Richard Heart Illegally Raised $1B, Misappropriated $12M

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.

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,” 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, 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, 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, Director of the SEC’s Fort Worth Regional Office, stated in
the statement.

War against Crypto Exchanges

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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This article was written by Solomon Oladipupo at www.financemagnates.com.

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