Crypto founder allegedly bought ‘The Enigma,’ the largest black diamond in the world, after raising more than $1 billion in unregistered securities
Ben Weiss
Mon, July 31, 2023
Giuseppe Cacace—AFP/Getty Images
The Securities and Exchange Commission continued its broadside against the crypto industry on Monday when it sued Richard Schueler (who goes by Richard Heart) and his crypto projects—Hex, PulseChain, and PulseX—for allegedly raising more than $1 billion by offering unregistered securities.
In the lawsuit, the SEC alleges Schueler used at least $12 million of the proceeds to buy himself a suite of luxury goods: nearly $7.2 million worth of luxury cars and watches, including a 2020 white Ferrari Roma and a Rolex Daytona Eye of the Tiger, and almost $5 million paid to Sotheby’s for “The Enigma,” a 555-carat black diamond said to be the largest in the world.
“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,” Eric Werner, director of the SEC’s Fort Worth office, said in a statement. “This action seeks to protect the investing public and hold Heart accountable.”
Heart did not immediately respond to a request for comment when contacted by Fortune on Twitter. “The things that I’m designing are designed to be the pinnacle of their field,” he said in a video posted to his website.
A YouTube streamer and crypto personality, Heart began marketing Hex in 2018, according to the SEC, claiming that it was the first high-yield “blockchain certificate of deposit.” He engaged in three separate offerings of “crypto asset securities,” the SEC alleges, one for Hex, one for PulseChain—what Heart said was a layer-1 fork of Ethereum—and then another for PulseX, a DeFi protocol. HEX, PLS, and PLSX, respectively, were the associated tokens.
The action against Heart and his crypto projects follows a series of blockbuster lawsuits from the agency against much larger firms and industry players.
After the collapse of FTX in November, the SEC has sued Gemini, Genesis, Bittrex, Tron, and the company behind TerraUSD, among others. The federal government has also targeted the biggest names in the industry, with lawsuits against Coinbase, the largest U.S.-based crypto exchange, and Binance, the largest in the world.
This story was originally featured on Fortune.com
U.S. SEC Sues Richard Heart, Hex, PulseChain on Unregistered Securities, Fraud Allegations
Nikhilesh De
Mon, July 31, 2023
(Richard Heart/YouTube)
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 Forth Worth Regional Office Director Eric Werner said in a statement that hte suit "seeks to protect the investing public and hold Heart accountable for his actions."
Nikhilesh De
Mon, July 31, 2023
(Richard Heart/YouTube)
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 Forth Worth Regional Office Director Eric Werner said in a statement that hte suit "seeks to protect the investing public and hold Heart accountable for his actions."
SEC sues Richard Heart and his projects Hex, PulseChain and PulseX for fraud, securities violations
Jacquelyn Melinek
Jacquelyn Melinek
TECH CRUNCH
Mon, July 31, 2023
The U.S. Securities and Exchange Commission (SEC) said it is suing Richard Schueler, known online as Richard Heart, and his three crypto projects, Hex, PulseChain and PulseX, for conducting unregistered offerings of “crypto asset securities.”
The unregistered offerings raised more than $1 billion in crypto from investors, the agency stated.
Heart and PulseChain also were charged with 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.”
PulseChain launched in May, and PulseX is the exchange on its blockchain that allows users to exchange other tokens on its network, according to its website.
With that said, Hex claims it's not a scam, and even has a page on its website dedicated to clarifying itself.
The SEC echoed that Heart allegedly created the “staking” feature for HEX tokens, which he claimed would provide yields as high as 38%, the agency stated. 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.”
From December 2019 to November 2020, Heart and Hex allegedly offered and sold HEX tokens in an unregistered offering, bringing in over 2.3 million ether, worth about $4,271,468,000 at present value, the SEC stated.
The SEC also alleged that between July 2021 and March 2022, Heart created two additional unregistered crypto tokens, PLS and PLSX, that raised hundreds of millions in crypto to support PulseChain and PulseX, respectively.
The price of the HEX, PLS and PLSX tokens fell 24%, 25% and 42%, respectively, on Monday after news of the SEC’s complaint.
In recent months, the SEC has ramped up efforts to crack down on the crypto industry, going after companies big and small for alleged securities violations, fraud and other activities. As the agency continues to scrutinize the space, we could well see other firms facing lawsuits in the coming months.
All in all, the SEC’s issue is with companies treating crypto assets as securities, something that the industry and other government regulatory bodies don’t agree on.
Earlier this month, a federal court ruled that the XRP token, used for the Ripple blockchain, is not a security when sold to the broader public, but could be considered as one for institutional sales. The SEC had alleged in its case that Ripple and two executives had raised $1.3 billion in an alleged “unregistered, ongoing digital asset securities offering.”
Stu Alderoty, chief legal officer of Ripple Labs, told me on TechCrunch’s Chain Reaction podcast that the ruling could potentially provide clarity for other pending lawsuits. “I think our case and the decision rendered by our judge will provide comfort to other judges that the SEC is just misguided.”
But, he said, the question that policymakers and lawyers should be asking is, “What’s the best regulatory framework that we can create that protects the integrity of the market?”
Mon, July 31, 2023
The U.S. Securities and Exchange Commission (SEC) said it is suing Richard Schueler, known online as Richard Heart, and his three crypto projects, Hex, PulseChain and PulseX, for conducting unregistered offerings of “crypto asset securities.”
The unregistered offerings raised more than $1 billion in crypto from investors, the agency stated.
Heart and PulseChain also were charged with 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.”
PulseChain launched in May, and PulseX is the exchange on its blockchain that allows users to exchange other tokens on its network, according to its website.
The two entities were off to a rocky start due to their connection to Hex and some community members' concerns about its fundamentals. Hex has been around since 2019 and doesn’t have a stellar reputation because many market players view it as a scam due to its advertisements as the first “blockchain certificate of deposit.” It claimed that users who stake its token could mine new coins with high APYs and deposits are worth “trillions of dollars” and are “worth more than gold, credit card companies and cash.” 🙄
With that said, Hex claims it's not a scam, and even has a page on its website dedicated to clarifying itself.
The SEC echoed that Heart allegedly created the “staking” feature for HEX tokens, which he claimed would provide yields as high as 38%, the agency stated. 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.”
From December 2019 to November 2020, Heart and Hex allegedly offered and sold HEX tokens in an unregistered offering, bringing in over 2.3 million ether, worth about $4,271,468,000 at present value, the SEC stated.
The SEC also alleged that between July 2021 and March 2022, Heart created two additional unregistered crypto tokens, PLS and PLSX, that raised hundreds of millions in crypto to support PulseChain and PulseX, respectively.
The price of the HEX, PLS and PLSX tokens fell 24%, 25% and 42%, respectively, on Monday after news of the SEC’s complaint.
In recent months, the SEC has ramped up efforts to crack down on the crypto industry, going after companies big and small for alleged securities violations, fraud and other activities. As the agency continues to scrutinize the space, we could well see other firms facing lawsuits in the coming months.
All in all, the SEC’s issue is with companies treating crypto assets as securities, something that the industry and other government regulatory bodies don’t agree on.
Earlier this month, a federal court ruled that the XRP token, used for the Ripple blockchain, is not a security when sold to the broader public, but could be considered as one for institutional sales. The SEC had alleged in its case that Ripple and two executives had raised $1.3 billion in an alleged “unregistered, ongoing digital asset securities offering.”
Stu Alderoty, chief legal officer of Ripple Labs, told me on TechCrunch’s Chain Reaction podcast that the ruling could potentially provide clarity for other pending lawsuits. “I think our case and the decision rendered by our judge will provide comfort to other judges that the SEC is just misguided.”
But, he said, the question that policymakers and lawyers should be asking is, “What’s the best regulatory framework that we can create that protects the integrity of the market?”
US SEC says Hex crypto founder defrauded investors, spent money on 'Enigma' diamond
FILE PHOTO: Signage is seen at the headquarters of the U.S. Securities and Exchange Commission (SEC) in Washington, D.C., U.S.
By Jonathan Stempel
FILE PHOTO: Signage is seen at the headquarters of the U.S. Securities and Exchange Commission (SEC) in Washington, D.C., U.S.
By Jonathan Stempel
Mon, July 31, 2023
NEW YORK (Reuters) -The U.S. Securities and Exchange Commission has charged online entrepreneur Richard Heart with illegally raising more than $1 billion in three unregistered cryptocurrency offerings, and defrauding investors out of $12.1 million to buy luxuries including the world's largest black diamond.
In a complaint filed on Monday in Brooklyn federal court, the SEC said Heart, also known as Richard Schueler, touted his Hex token, PulseX asset trading platform and PulseChain asset network on YouTube and other websites as pathways to "grandiose wealth."
The SEC said Heart knew his often "tongue-in-cheek" disclaimers that his offerings were not securities were false, including when he said Hex was capable of 38% annual returns and "built to be the highest appreciating asset that has ever existed in the history of man."
He was also accused of spending PulseChain investor funds on McLaren and Ferrari sports cars, four Rolex watches costing $3.02 million, and "The Enigma," a 555-carat black diamond costing 3.16 million British pounds (then $4.28 million) at a Sotheby's auction in February 2022.
Heart, 43, is a U.S. citizen believed to live in Helsinki, Finland, the SEC said. He could not immediately be reached for comment, and a lawyer for him could not be identified. Hex, PulseX and PulseChain are also defendants.
The lawsuit seeks civil fines and the recouping of gains from alleged wrongdoing that begin in late 2019.
According to the SEC, Hex's price had by June 30 fallen more than 98% from its peak, while PulseChain and PulseX offerings are now "practically worthless."
SEC Chair Gary Gensler has tried to rein in a crypto sector that he has said undermines investor trust in U.S. capital markets.
Hex's website says the token's long-term goal is to replace credit card and payment companies, certificates of deposit, and gold as a store of value. It also says "Hex is not a scam."
On his personal website, Heart calls himself a "force for good" who "makes the world a better place," and posted a nearly 30-minute video of him installing a bidet for his mother.
The case is SEC v Schueler et al, U.S. District Court, Eastern District of New York, No. 23-05749.
(Reporting by Jonathan Stempel and Chris Prentice in New York; Additional reporting by Katharine Jackson and Ismail Shakil; Editing by Will Dunham, Mark Porter and Marguerita Choy)
Huge Diamond Bought Illegally With Crypto Proceeds, SEC Alleges
Allyson Versprille
Mon, July 31, 2023
(Bloomberg) -- The creator of crypto token Hex illegally used millions of dollars of investor funds to buy a 555-carat black diamond known as “The Enigma,” according to the US Securities and Exchange Commission.
Wall Street’s main regulator alleged in federal court on Monday that Richard Schueler, who goes by Richard Heart, raised more than $1 billion by selling unregistered securities, including the Hex coin and other tokens affiliated with his PulseChain blockchain network and PulseX decentralized finance platform. Heart and PulseChain used at least $12.1 million of investor funds for personal luxury purchases, including the diamond, expensive watches and high-end automobiles, the agency said.
The price of the Hex token fell about 25% to a fraction of 1 cent after the lawsuit was announced, according to CoinMarketCap data. PulseChain’s PLS and PulseX’s PLSX tokens also plunged after the lawsuit was announced. Richard Heart didn’t immediately return a request for comment.
Even though the Hex coin is among thousands that trade at just a few cents or less, it amassed a significant following among digital-asset enthusiasts. Heart positioned himself at the center of the hype, projecting an over-the-top presence on social media with his designer track suits, expensive jewelry and luxury vehicles.
“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,” said Eric Werner, director of the SEC’s Fort Worth Regional Office.
In one specific allegation, the SEC said Hex investors “reasonably expected to derive profits” from their holdings through a staking offering that allowed them to lock up their tokens in exchange for additional coins in the future.
According to the SEC, Heart has repeatedly said that the purpose of the program was to “incentivize investors to lock up their Hex tokens — which reduced the number of Hex tokens in circulation — to drive up their price.” The SEC alleged that Heart and Hex advertised that investors would receive an average return of 38% for staking tokens.
The lawsuit is the latest in a string of SEC crypto enforcement actions this year. The regulator has also sued Coinbase Global Inc. and Binance Holdings Ltd. — the world’s largest crypto exchange.
--With assistance from Olga Kharif.
Bloomberg Businessweek
NEW YORK (Reuters) -The U.S. Securities and Exchange Commission has charged online entrepreneur Richard Heart with illegally raising more than $1 billion in three unregistered cryptocurrency offerings, and defrauding investors out of $12.1 million to buy luxuries including the world's largest black diamond.
In a complaint filed on Monday in Brooklyn federal court, the SEC said Heart, also known as Richard Schueler, touted his Hex token, PulseX asset trading platform and PulseChain asset network on YouTube and other websites as pathways to "grandiose wealth."
The SEC said Heart knew his often "tongue-in-cheek" disclaimers that his offerings were not securities were false, including when he said Hex was capable of 38% annual returns and "built to be the highest appreciating asset that has ever existed in the history of man."
He was also accused of spending PulseChain investor funds on McLaren and Ferrari sports cars, four Rolex watches costing $3.02 million, and "The Enigma," a 555-carat black diamond costing 3.16 million British pounds (then $4.28 million) at a Sotheby's auction in February 2022.
Heart, 43, is a U.S. citizen believed to live in Helsinki, Finland, the SEC said. He could not immediately be reached for comment, and a lawyer for him could not be identified. Hex, PulseX and PulseChain are also defendants.
The lawsuit seeks civil fines and the recouping of gains from alleged wrongdoing that begin in late 2019.
According to the SEC, Hex's price had by June 30 fallen more than 98% from its peak, while PulseChain and PulseX offerings are now "practically worthless."
SEC Chair Gary Gensler has tried to rein in a crypto sector that he has said undermines investor trust in U.S. capital markets.
Hex's website says the token's long-term goal is to replace credit card and payment companies, certificates of deposit, and gold as a store of value. It also says "Hex is not a scam."
On his personal website, Heart calls himself a "force for good" who "makes the world a better place," and posted a nearly 30-minute video of him installing a bidet for his mother.
The case is SEC v Schueler et al, U.S. District Court, Eastern District of New York, No. 23-05749.
(Reporting by Jonathan Stempel and Chris Prentice in New York; Additional reporting by Katharine Jackson and Ismail Shakil; Editing by Will Dunham, Mark Porter and Marguerita Choy)
Huge Diamond Bought Illegally With Crypto Proceeds, SEC Alleges
Allyson Versprille
Mon, July 31, 2023
(Bloomberg) -- The creator of crypto token Hex illegally used millions of dollars of investor funds to buy a 555-carat black diamond known as “The Enigma,” according to the US Securities and Exchange Commission.
Wall Street’s main regulator alleged in federal court on Monday that Richard Schueler, who goes by Richard Heart, raised more than $1 billion by selling unregistered securities, including the Hex coin and other tokens affiliated with his PulseChain blockchain network and PulseX decentralized finance platform. Heart and PulseChain used at least $12.1 million of investor funds for personal luxury purchases, including the diamond, expensive watches and high-end automobiles, the agency said.
The price of the Hex token fell about 25% to a fraction of 1 cent after the lawsuit was announced, according to CoinMarketCap data. PulseChain’s PLS and PulseX’s PLSX tokens also plunged after the lawsuit was announced. Richard Heart didn’t immediately return a request for comment.
Even though the Hex coin is among thousands that trade at just a few cents or less, it amassed a significant following among digital-asset enthusiasts. Heart positioned himself at the center of the hype, projecting an over-the-top presence on social media with his designer track suits, expensive jewelry and luxury vehicles.
“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,” said Eric Werner, director of the SEC’s Fort Worth Regional Office.
In one specific allegation, the SEC said Hex investors “reasonably expected to derive profits” from their holdings through a staking offering that allowed them to lock up their tokens in exchange for additional coins in the future.
According to the SEC, Heart has repeatedly said that the purpose of the program was to “incentivize investors to lock up their Hex tokens — which reduced the number of Hex tokens in circulation — to drive up their price.” The SEC alleged that Heart and Hex advertised that investors would receive an average return of 38% for staking tokens.
The lawsuit is the latest in a string of SEC crypto enforcement actions this year. The regulator has also sued Coinbase Global Inc. and Binance Holdings Ltd. — the world’s largest crypto exchange.
--With assistance from Olga Kharif.
Bloomberg Businessweek
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