The U.S. Securities and Exchange Commission (SEC) is actively pursuing lawsuits - this time the complaint is directed at crypto influencer Richard Heart, who is accused of using around $12 million of investor funds to purchase luxury items.
Today we charged Richard Heart (aka Richard Schueler) 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.
— U.S. Securities and Exchange Commission (@SECGov) July 31, 2023
Heart was born in the US and currently resides in Finland. Since 2017, he has managed a YouTube channel where he promotes his own crypto products, including the Hex token and its sister product PulseChain, which operates on the PulseX protocol.
The SEC alleges that Heart raised over $1 billion through his unregistered crypto asset securities Hex, PulseChain, and PulseX, promoting his products as "a path to grandiose wealth for investors" claiming that Hex was "designed to become the largest asset in the history of mankind."
Although the crypto-blogger claimed that investments in his products were aimed at promoting "freedom of speech," the SEC states that he secretly spent "millions of dollars of PulseChain investor funds on luxury items." Some of these purchases include a McLaren sports car for $534,916, a Ferrari Roma for $314,125, and Rolex watches for $1.38 million. In February 2022, he allegedly spent $5 million on acquiring the 555-carat black diamond "Enigma" - possibly the largest in the world.
The lawsuit also states that from December 2019 to November 2020, Heart accepted over $2.3 million in Ethereum cryptocurrency totaling around $678 million in exchange for Hex tokens. However, the SEC claims that 94% to 97% of these deposits were "recycled" transactions, allowing Heart and other insiders to control "a large amount of Hex tokens," as well as "creating a false impression of significant trading volume and organic demand."
The lawsuit comes amidst a wave of lawsuits that the SEC has initiated in recent months to regulate the crypto industry - specifically against Binance and its CEO Changpeng Zhao, as well as Tron founder Justin Sun and cryptocurrency exchange Coinbase.
Recently, Coinbase CEO Brian Armstrong stated that the SEC demanded the cryptocurrency exchange to cease trading all cryptocurrencies, except for Bitcoin, hinting that all these digital coins may be considered securities and fall under the commission's jurisdiction.
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