Richard Heart, founder of blockchain projects PulseChain and HEX, was hit with a lawsuit from the U.S. Securities and Exchange Commission (SEC) on Oct. 31 for alleged fraud and selling unregistered securities.
In a document filed on December 11, the SEC detailed the service of the lawsuit, adhering to Finnish law and the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents. Heart resides in Helsinki, Finland. Heart was indicted by the SEC on July 31, 2023.
The lawsuit accuses Heart, which operates under the entities Hex, PulseChain and PulseX, of selling unregistered securities over a three-year period and misappropriating funds for personal use.
The SEC’s initial July 31 complaint alleged that Heart defrauded investors and engaged in the unregistered sale of crypto securities through its entities. These entities, each with their native token, have collectively helped raise over $1 billion.
The SEC highlighted Heart’s role as the controlling force behind these projects, promising investors substantial wealth. However, it appears that part of these funds, approximately $12 million, was diverted by Heart for luxury personal expenses, including sports cars, watches and a 555-carat black diamond named “The Enigma », renamed “HEX”. com diamond.
Heart has publicly criticized the SEC, saying its efforts in the crypto sector have been more effective in protecting investors than those of the regulator. According to a video clip that resurfaced during January’s HexConference, Heart accused the SEC of attacking the beneficial aspects of the crypto world and neglecting to address significant industry malpractice. He also argued that his projects, including HEX, PulseChain, and PulseX, should not be classified as securities under the Howey test, highlighting their decentralized nature and lack of expectation of profit from their buyers.
Heart launched HEX in December 2019 and quickly attracted the attention of analysts and industry experts. Marketed as the first high-interest blockchain certificate of deposit, HEX was announced with the promise of unprecedented growth, claiming potential returns in excess of 10,000x in two and a half years. The project received an influx of over 33,000 ETH, the equivalent of around $5 million at the time, in the form of what were called “donations” which were converted into HEX tokens .