The U.S. Securities and Exchange Commission (SEC) has filed a federal lawsuit against Richard Schueler, known as Richard Heart, and his affiliated companies Hex, Pulsechain, and Pulsex, alleging that they raised over $1 billion through unregistered securities offerings and defrauded investors by misappropriating funds for personal luxury purchases. The case marks another major enforcement action by the SEC in the cryptocurrency space, reinforcing its stance that many digital tokens are securities subject to federal registration requirements.
SEC Alleges Unregistered Securities Offerings
According to the SEC's complaint filed in the U.S. District Court for the Southern District of New York, Heart began offering Hex tokens in December 2019, marketing them as a “high-yield blockchain certificate of deposit” with promises of bonuses and incentives for investors. Between December 2019 and November 2020, Heart accepted more than $678 million worth of Ether from investors in exchange for Hex tokens. The SEC asserts that Hex tokens are securities and were offered without proper registration.
Further, between July 2021 and April 2022, Heart conducted unregistered offerings for two new projects: Pulsechain and Pulsex. Investors were urged to deposit crypto assets into public wallet addresses in exchange for tokens to be delivered later. The complaint states that Pulsechain raised over $354 million and Pulsex raised over $676 million through this method. The SEC argues that these offerings also constitute unregistered securities transactions.
Misappropriation of Investor Funds
The lawsuit also accuses Heart and Pulsechain of fraud by misappropriating at least $12.1 million of investor funds for personal expenses, rather than using them to develop the Pulsechain network as promised. Specifically, the SEC alleges that Heart used investor money to purchase a 555-carat diamond, multiple luxury watches, and expensive cars. “Heart lied to investors and siphoned millions of dollars from the very projects he asked them to fund,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, in a statement.
SEC Seeks Permanent Injunctions and Disgorgement
The SEC is seeking permanent injunctions against Heart and his companies to prevent future securities law violations, as well as disgorgement of ill-gotten gains plus prejudgment interest and civil penalties. The agency wants the court to hold a trial to determine the appropriate remedies. The case could set an important precedent for how the SEC treats future token offerings, particularly those involving DeFi protocols and Layer-1 blockchain projects.
Market Reaction and Industry Impact
Following the news, the prices of HEX, Pulsechain (PLS), and PulseX (PLSX) tokens experienced significant volatility. HEX dropped by more than 20% in the hours after the announcement, while PLS and PLSX also declined sharply. Market participants are closely watching the case, as the outcome may influence regulatory clarity for similar projects. Richard Heart has publicly denied the allegations, calling the SEC lawsuit “baseless harassment” and arguing that Hex and Pulsechain are fully decentralized and open-source. Legal experts, however, note that the SEC has a strong track record in recent crypto enforcement actions, notably after its partial victory against Terraform Labs.
As of press time, no formal response has been filed by Heart’s legal team. The crypto community awaits further developments, with many seeing this as a critical test of the SEC’s authority over decentralized finance projects.