The Securities and Exchange Commission (SEC) has sued US citizen Richard Schueler, also known as Richard Heart, for unregistered crypto securities sales that raised over $1 billion. 

The SEC alleged that Schueler administered the Hex, PulseChain, and PulseX crypto-asset offers and promoted them as a "pathway to grandiose wealth," according to a CNBC report.

Hex tokens used to make the offers were advertised as an Ethereum-based "Certificate of Deposit." The SEC asserts that the 38% annual return that was guaranteed was a front for a complex fraud. In civil court, Schueler is accused of three counts of securities fraud.

Scamming Investors

The SEC asserts that Schueler knew his disclaimers designating the offers as non-securities were misleading, including his assertion that Hex could provide a 38% annual return and was the asset with the greatest appreciation rate in history. 

Additionally, Richard Heart is accused of lavishly spending money from PulseChain investors on expensive items, such as McLaren and Ferrari sports cars, four $3.02 million Rolex watches, and "The Enigma," a 555-carat black diamond bought in February 2022 for 3.16 million British pounds (at the time, $4.28 million), per Reuters.

Richard Heart, who is said to be 43 years old and lives in Helsinki, Finland, has yet to comment on the matter. Hex, PulseX, and PulseChain are all named as defendants in the complaint.

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The SEC is suing for civil penalties and the recovery of profits from suspected violations that allegedly started in late 2019. As of June 30, Hex's price has fallen more than 98% from its high, and PulseChain and PulseX are now regarded as "practically worthless."

SEC Keeping an Eye on Cryptocurrency Industry

In an effort to increase investor confidence in American capital markets, SEC Chair Gary Gensler has been aggressively trying to regulate the cryptocurrency industry. The SEC's action refutes Hex's claims that it may serve as a substitute for credit card and payment firms, certificates of deposit, and gold as a store of value.

As the SEC pursues legal action against businesses for suspected securities breaches, fraud, and other behaviors, the most recent lawsuit against Richard Schueler underscores the agency's growing emphasis on cryptocurrency. The result of this case and the SEC's continuing investigation may prompt more legal action against other crypto-related businesses.

Companies that treat crypto assets as securities are the SEC's main worry since this is a topic of conflict with the sector and other regulatory agencies, TechCrunch reported.

Notably, a federal court recently decided that while the XRP currency used for the Ripple blockchain is not a security when sold to the general public, it may be deemed one for institutional sales, underscoring the difficulty of regulating digital assets.

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