The Securities and Exchange Commission has charged Richard Heart 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.

Through PulseChain, Richard Heart was found to have committed fraud for misappropriating at least $12 million of offering proceeds to purchase luxury goods including sports cars, watches, and a 555-carat black diamond known as ‘The Enigma’ – reportedly the largest black diamond in the world, the SEC alleges.

The cryptocurrency market has already reacted to the SEC complaint, with the price of HEX falling to the $0.006 region, currently down by approximately 25%.

HEX is an ERC20 token launched on the Ethereum network and was officially designed to be a store of value to replace the Certificate of Deposit as the blockchain counterpart of that financial product used in traditional financial markets.

Richard Heart allegedly said Hex tokens would make people “rich”

The civil lawsuit was long expected. After facing allegations of being a Ponzi scheme, HEX was put on the SEC’s crosshairs in November 2022. The regulator sent subpoenas to various “influencers” and promoters in Heart’s network, requesting any records of information they might have on HEX, Heart himself, and the associated PulseChain and PulseX projects.

Hex was marketed in 2018 as the first high-yield “blockchain certificate of deposit” and Hex tokens were promoted as an investment designed to make people “rich.”

From at least December 2019 through November 2020, Richard 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.

Two additional unregistered crypto asset security offerings, PulseChain and PulseX – each of them raising hundreds of millions of dollars more in crypto assets – were intended to support development of a supposed crypto asset network, PulseChain, and a claimed crypto asset trading platform, PulseX.

Richard Heart also allegedly designed and marketed a so-called “staking” feature for Hex tokens, which he claimed would deliver returns as high as 38 percent. The complaint further alleges that Heart attempted to evade securities laws by calling on investors to “sacrifice” (instead of “invest”) their crypto assets in exchange for PLS and PLSX tokens.

Eric Werner, Director of the Fort Worth Regional Office at the SEC, 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. This action seeks to protect the investing public and hold Heart accountable for his actions.”