The U.S. Securities and Exchange Commission (SEC) sued internet marketer Richard Schueler, known online as Richard Heart, and his projects Hex, PulseChain and PulseX, alleging he raised over $1 billion across three different unregistered securities offerings beginning in 2019.
Heart also defrauded his investors, the SEC alleged in a lawsuit on Monday, by using investor funds for personal goods.
"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 lawsuit said. "... Although Heart claimed these investments were for the vague purpose of supporting free speech, he did not disclose that he used millions of dollars of PulseChain investor funds to buy luxury goods for himself."
PulseX and PulseChain launched earlier this month, but faced rocky starts in the weeks immediately after going live, seeing high fees, liquidity issues and exploitable bugs. The prices of the HEX, PLS and PLSX tokens fell post-launch.
Read more: The PulseChain Sideshow Tent Is Collapsing
Heart made frequent references to federal securities laws, the SEC further alleged, citing his YouTube livestreams and other public statements. However, the suit said, Heart had himself admitted that "the success of these endeavors were completely dependent on his efforts."
"Heart pumped Hex’s capacity for investment gain, claiming at Hex.com (until at least November 1, 2020) that, 'Hex is designed to surpass ETH, which did 10,000x price in 2.5 years. It’s working! So far, HEX’s USD price went up 115x in 129 days,'" the suit said. 'On December 2, 2019, during a seven-hour livestream on YouTube hours before the Hex Offering commenced, Heart stated that Hex “was built to outperform Ethereum and Bitcoin and all other cryptocurrencies.'"
The suit charges Heart and the projects with fraud and securities registration violations.
Heart could not immediately be reached for comment. SEC Fort Worth Regional Office Director Eric Werner said in a statement that the suit "seeks to protect the investing public and hold Heart accountable for his actions."
UPDATE (July 31, 2023, 14:55 UTC): Adds additional detail.
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