The US Securities & Exchange Commission (SEC) has taken action against Richard Heart for raising funds through an unregistered crypto-asset offering. Heart allegedly raised over a billion dollars and misappropriated the funds to purchase luxury items. Three entities, PulseX, PulseChain, and Hex, which are unincorporated and controlled by Heart, are also charged. These entities are accused of conducting unregistered crypto securities offerings.

PulseChain and Heart specifically misappropriated $12 million to buy watches, sports cars, and The Enigma, the world’s largest black diamond.

This case exemplifies the misuse of raised funds for purposes other than those promised to investors. Funds were solicited under the pretense of supporting a crypto asset network and trading platform development, with investors receiving native tokens PLS and PLSX in return. However, Heart and his entities diverted these assets for personal use.

The scheme began in 2018 when Heart marketed Hex, claiming it offered the highest market yield of approximately 38%. This was promoted as a blockchain certificate of deposit to attract investors. Hex tokens were sold in an unregistered offering from December 2019 to November 2020, resulting in the collection of over 2.3 million ETH. Heart and Hex further manipulated the market through recycling transactions to control Hex tokens.

From July 2021 to March 2022, two more unregistered crypto asset security offerings were conducted, raising millions of dollars. The staking feature, promising a 38% yield, was the final deceptive tactic, with Heart defrauding investors by encouraging them to sacrifice their tokens instead of investing them.

Eric Werner of the Fort Worth Regional Office noted that Heart was selling unregistered crypto asset securities and defrauding investors by using the funds for luxury purchases. The SEC's charges aim to protect investors and hold Heart and the three entities accountable for their illegal activities. The SEC's complaint seeks penalties, prejudgment interest, injunctive relief, and other equitable relief.

The investigation against Heart and his entities is being led by Jaime Marinaro and Derek Kleinmann.