On Monday, the US Securities and Exchange Commission (SEC) filed a lawsuit against Richard Heart for allegedly selling unregistered securities in the form of Hex, PulseChain, and PulseX. A crypto influencer, Heart raised more than $1 billion in investments.
The commission’s charges claim that Heart spent millions of dollars from investments on luxury personal items, including watches, sports cars, and the world’s biggest cut diamond.
Hex (an Ethereum-based token), PulseChain (a blockchain), and PulseX (a decentralized crypto exchange) are at the core of Heart’s business. Heart also owns a YouTube channel with more than 150,000 subscribers. The main content of the channel includes music videos, crypto advertisements, and displays of lavish living.
Heart’s Hex came into being in 2018, claiming it was the first high-yield “blockchain certificate of deposit,” and began promoting Hex tokens as an investment designed to make people “rich.”
Heart spent the following two years marketing Hex, encouraging investors to put their money into the platform, gaining him over 2.3 million Ethereum (ETH) through so-called “recycling” transactions that enabled him to gain control of more Hex tokens surreptitiously.
The commission also claims that Heart, between at least July 2021 and March 2022, promoted two additional unregistered crypto asset security offerings that each raised hundreds of millions of dollars more in crypto assets.
He promoted these investments as a route towards the development of PulseChain, and a claimed crypto asset trading platform, PulseX. Heart also allegedly designed and marketed a so-called “staking” feature for Hex tokens, which he claimed would deliver returns as high as 38 percent.
The curious part is that the commission’s charges claim that Heart attempted to evade securities laws by calling on investors to “sacrifice,” avoiding the term “invest,” their crypto assets in exchange for PLS and PLSX tokens.
“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,” reported Eric Werner, Director of the Fort Worth Regional Office. “This action seeks to protect the investing public and hold Heart accountable for his actions.”
“The SEC also charged Heart and PulseChain 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,” reads the SEC’s press release.
The SEC is also suing Heart for allegedly “misappropriating at least $12.1 million of PulseChain investor funds. Instead of using these investor funds to develop and market the PulseChain network, or even to fulfill Heart’s explicit statement that invested funds supported “freedom of speech,” Heart and PulseChain used at least $12.1 million of investor funds for his personal luxury purchases, including a massive diamond, expensive watches, and high-end automobiles,” according to the court filing .
The Enigma, a 555-carat diamond, is central to Heart’s controversy. The origin of the diamond is assumed to be from outer space because it contains small amounts of nitrogen and hydrogen and may be more than 2 billion years old.
Tobias Kormind, co-founder and managing director of European online jeweler 77 Diamonds reports that “The size, shape and source of the Enigma diamond make it groundbreaking and amazing,” adding that “Apart from being the largest cut diamond in the world, the Enigma is remarkably unusual for additional reasons.”
“What cannot be denied is that The Enigma is a diamond with unparalleled bragging rights.”