Where is Richard Heart? SEC faces challenges in serving lawsuit to HEX founder

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The U.S. Securities and Exchange Commission (SEC) has thus far been unsuccessful in its attempts to serve HEX and PulseChain founder Richard Schueler, aka Richard Heart, with its lawsuit for selling unregistered securities.

In its recent filing with the U.S. District Court for the Eastern District of New York, the securities regulator said it requested, in August, that the Ministry of Justice of Finland serve the lawsuit to Heart, who lives in Helsinki. However, to date, the regulator said it “has not received confirmation of service” from Finnish authorities.

The same day the SEC filed the update on its unsuccessful attempts to serve Heart, presiding Judge Peggy Kuo decided to reschedule a pre-trial conference from November 28, 2023, to January 30, 2024—presumably in the hopes that Heart may have been served by then and will actually show up.

In July, the SEC charged Heart and three unincorporated entities that he controls, HEX, PulseChain, and PulseX, conducting unregistered offerings of digital asset securities that raised more than $1 billion from investors.

Heart was known for living his luxury “crypto-fuelled” lifestyle out loud, posting videos of himself with bags full of luxury goods and decked out head-to-toe in designer clothes. It’s no surprise that when Heart took down his braggadocious Instagram profile in March “to show more humility and respectfulness,” it raised some eyebrows and alarms amongst HEX supporters.

Heart’s new-found humility came too late to prevent the SEC from also charging him with fraud and misappropriating of at least $12 million of investor funds 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.”

Heart’s Ponzis

Heart began marketing HEX in 2018 as a token on the Ethereum network, focusing on yield farming. When it debuted in December 2019, customers were urged to buy HEX with ETH and stake their HEX as a ‘Blockchain Certificate of Deposit.’ The idea was that they would receive even more HEX in the future, by which time the value of each HEX would have, hopefully, gone up.

This Ponzi hallmark, the promise of ever greater rewards for those who lock up their assets for longer periods of time, allowed Heart to rope in more investors before having to pay anything back.

As has frequently been the case with these types of digital asset scams, CoinGeek was onto this from an early stage, highlighting suspicious transactions related to HEX back in 2020. Heart brushed off such critiques, calling media concerns about HEX “stupid.”

Heart followed up this profitable Ponzi with another money-spinning scheme, PulseChain, an Ethereum fork promising lower transaction fees than the main Ethereum layer. Between July 2021 and April 2022, investors put over $354 million into PulseChain and another $676 million into PulseX, a decentralized finance (DeFi) swap platform.

The SEC claims that Heart promoted both PulseChain and PulseX as being part of a network that would increase HEX’s value. Profits made from PulseChain and PulseX, through the offerings of their native tokens PLS and PLSX, respectively, would supposedly feed back into the network and increase the value of all the assets.

Unfortunately for Heart, according to the SEC lawsuit, HEX, PLS, and PLSX, all meet the Howey Test for determining if an asset is a security—and all were offered by Heart without registering or seeking prior approval from the SEC, as is required by law.

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FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.