The US Securities and Exchange Commission (SEC) is suing entrepreneur Richard Heart for raising more than $1 billion from selling unregistered securities.
Heart allegedly hired developers to build three unincorporated projects PulseChain, PulseX, and Hex, offering investors a means to earn “grandiose wealth.”
SEC Accuses Heart of Securities Fraud For Abusing Customer Funds
According to the SEC, Heart offered all three tokens in products that passed the Howey Test. The investment vehicles should have been registered as securities with the agency.
“Each of the Hex, PulseChain, and PulseX offerings involved investments of money in common enterprises with the reasonable expectation of profits to be derived based on the efforts of others.”
Heart allegedly started selling Hex tokens in 2019.
According to the SEC, he promised investors “incentives and bonuses,” marketing the assets as high-yield blockchain “certificates of deposit.” Investors could receive a 38% annual return on Hex tokens staked for a long period.
According to the SEC, Heart and his team allegedly received 2.3 million ETH in deposits in exchange for outsized returns but faked the inflows to promote the project to other investors. Additionally, the agency accused the Finland-based entrepreneur of using $12.1 million in investor deposits to buy luxury goods for himself.
The abuse of customer funds violates US securities laws. In the entrepreneur’s defense, crypto venture capitalist Nic Carter pointed out that Heart didn’t try to conceal the purchases.
The SEC demands a trial by jury to force Heart to stop participating in securities trading.
SEC Continues Rampage Despite XRP Win
The lawsuit is the latest rebuttal to the industry the SEC chair recently said is “rife with fraud and hucksters.”
Ripple Labs recently scored a victory against the agency when US judge Analisa Torres ruled that sales of XRP through an exchange did not qualify as a security. However, the judge did say that Ripple broke securities laws by selling XRP to raise funds from institutional investors.
Learn more about the SEC’s fight with the crypto industry here.
The case notched a partial win for the crypto industry, which has questioned the SEC’s authority in governing the US crypto industry. The SEC has appealed the ruling, but crypto lawyer John Deaton says a second circuit court appeal could take years.
US Democrats have stonewalled the passage of vital crypto laws the House Financial Services Committee proposed.
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