On Thursday, an Eastern District of New York courtroom filled with over 70 bystanders to hear Richard Heart’s lawyers argue his case for dismissing the SEC’s lawsuit against him and his crypto projects HEX, Pulsechain, and PulseX.

At the outset, Heart’s lawyers contested jurisdiction, asking the judge to dismiss the lawsuit entirely because, in Heart’s view, the SEC lacks jurisdiction over him and the entities it is suing.

Heart says that, although he grew up near Pittsburgh, Pennsylvania, he lived in Finland and elsewhere abroad during the time periods in question. Moreover, he believes the unincorporated entities HEX, Pulsechain, and PulseX are not subject to the jurisdiction of US courts.

First order of business: Jurisdiction

Heart’s lawyers used a considerable portion of Thursday’s oral argument to argue their stance on the SEC’s lack of jurisdiction. They explained why Heart believes the SEC did not plausibly allege a domestic securities transaction, failed to satisfy pleading requirements, and failed to plausibly allege how HEX, Pulsechain, and PulseX transactions passed the US Supreme Court’s Howey Test.

According to one “Hexican” who attended the hearing live, “We pretty much won on that front that this is out of the SEC’s jurisdiction. You know, obviously you can’t sue open-source software.” Of course, whether or not the SEC has jurisdiction is up to the judge, not bystanders. She has not yet filed her determination.

That bystander also claimed that the SEC’s chronology of events contained errors that weakened the commissioners’ case during Thursday’s hearing.

For context, that same bystander soon fawned that Heart’s lawyers “adjusted the syntax of my mind” as “a chill ran up my spine.” He claimed the SEC was trying to “take away people’s right to transact” and glowed about how “it really felt we were part of something really special. I feel like Richard Heart changed the syntax of how the legal system is going to have to grapple with this new technology.”

Read more: Finland wants to detain Richard Heart, alleges millions in unpaid taxes

Next steps for HEX and Heart’s motion to dismiss

After discussing jurisdiction, Heart’s lawyers asked the judge to discredit the SEC’s fraud claims. 

The SEC’s stance is that Heart committed fraud by using investor funds for personal gain, selling Hexicans’ contributions of ETH and other altcoins to buy personal luxuries like watches.

Heart’s lawyers spent most of their time focusing on his repeated reminders to his fans that they should never expect to profit from the efforts of others. These prominent disclaimers, in addition to other factors, allegedly discredit the SEC’s fraud claims.

Within a few days, Judge Amon will decide whether the SEC’s case against Heart will continue as originally pleaded. The judge may grant or deny Heart’s motion to dismiss in full or in part.

Observers may watch the docket for her upcoming determination. A decision might take up to 90 days.

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The post Richard Heart tells court full of US investors that HEX wasn’t aimed at them appeared first on Protos.

Finnish police want to detain crypto fugitive Richard Heart on suspicion of assault and gross tax evasion believed to be in the region of several hundred million euros. 

The remand order for Heart, real name Richard Schueler, was issued by Finnish police last Friday. Heart is suspected of owing tax in Finland after the country’s tax administration found his returns did not match up with its assessment. 

Helsinki police detective Harri Saaristola told Finnish publisher Yle, “It is then a matter of neglecting to report [income] or offering false information.”

He added, “Based on the very considerable amount of money in question and the long-term and planned nature of the activity, there are grounds to suspect gross tax evasion.” 

Read more: Richard Heart claims SEC lawsuit infringes his free speech

The US Securities and Exchange Commission (SEC) charged Heart in July 2023 with misappropriating investor funds, accusing him of stealing millions of dollars through Hex, PulseChain, and PulseX and using it to buy watches, cars, and other luxury goods.  

Heart attempted to dismiss the lawsuit last April. His current whereabouts remain unknown but his home is reportedly in Helsinki, Finland’s capital. 

The remand order says his alleged tax avoidance took place between June 2020 and April 2024, while the suspected assault happened between February 16 and 17, 2021. The Finnish investigation is said to be in its early stages and is being carried out in conjunction with international authorities.

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The post Finland wants to detain Richard Heart, alleges millions in unpaid taxes appeared first on Protos.

When the SEC revealed the untold history of Richard Heart’s crypto projects in July last year, his use of investor money was an aside. At the time, ‘Hexicans’ — fans of his flagship project, HEX — were buying tickets for the debut of his feature-length movie. Rather than question Heart’s extravagant lifestyle, many chose to focus instead on the never-before-published history of his supposed ‘blockchain certificate of deposit.’

Oddly, HEX was down 99% from its high by the time his movie premiered.

Heart’s fans have always known that he, like many crypto founders, was rich and flaunted expensive purchases. Nevertheless, he had always promised his fans that his wealth came from elsewhere — his prior business from which he generated millions of dollars.

However, as Eric Wall explained, that was simply a tactic pulled from a book about cult leadership.

“He has literally read books on how to create cults. I think it’s called The 48 Laws of Power. That book outlines these things he did, like sacrifices, adorning himself in jewelry, claiming to be a self-made millionaire, and always claiming the source of his wealth came from elsewhere. Richard applied the lessons from that book almost verbatim.”

-Eric Wall

In a more recent court filing, SEC commissioners claim that Heart knowingly stole from his fans to buy watches, cars, and other luxury goods. According to the SEC’s opposition to Heart’s motion to dismiss, filed yesterday, Heart acted with scienter — intentional illegality — in misappropriating investor funds.

According to the SEC, Heart “knowingly engaged in a series of labyrinthine transactions designed to obscure his movements of newly invested PulseChain funds.” (PulseChain and its PLS coin was Heart’s second blockchain project, promoted to his HEX audience and partially funded with HEX tokens.) 

Read more: The Highest of Stakes with Richard Heart encapsulates the narcissism of crypto

SEC explains Richard Heart and ‘scienter’

Commissioners continued, “Heart knowingly spent millions of dollars of investor funds on personal luxury items.” To avoid any ambiguity, they reiterate, “Heart knew that he had not purchased his watches, cars, and large black diamond with actual profits from his enterprises, but with funds from investors.”

Driving the point home, “Heart was conscious of his misuse of invested funds.”

The lawsuit between the SEC and Heart’s projects HEX, PulseChain, and PulseX continues. The SEC responded to other legal matters in its filing yesterday, and a judge will soon rule on whether a motion to dismiss will be granted, or whether the case will proceed further toward discovery and trial.

Edit 16:47 UTC, Aug. 23: Removed a reference to Eric Wall doing business with Richard Heart.

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The post Richard Heart intentionally stole from Hexicans says SEC appeared first on Protos.

HEX founder Richard Heart has finally filed his Motion to Dismiss in the Eastern District of New York. Heart has been preparing to write the document — probably the most important he has ever written — for years.

The filing requests US District Court Judge Carol Bagley Amon to toss out the Securities and Exchange Commission’s (SEC) lawsuit against him and his three crypto projects: HEX, PulseChain, and PulseX.

Heart (real name Richard Schueler) founded HEX — which currently sits 98% down from all-time highs — and is also behind blockchain token PLS and exchange token PLSX. These are both also trading far below their all-time highs.

The SEC claims that Heart sold all three tokens to investors in unregistered securities transactions and raised over $1 billion in violation of US law. To protect US residents from further harm and fraud, commissioners have requested disgorgement of ill-gotten revenue, accumulated interest, fines, and permanent injunctions.

Read more: Crypto Twitter dunks on Richard Heart over a 2-year-old HEX ‘rug pull’

Most important document of Richard Heart’s career

A motion to dismiss is a defendant’s first, formal argument to a judge on why a lawsuit should be terminated. The document usually argues that the plaintiff has failed to adequately allege jurisdiction, grounds, and other matters of fact and law.

In his motion to dismiss, filed by his lawyers at Quinn Emanuel, Heart claims that he’s resided abroad and didn’t aim any securities offerings at US investors. He also claims that neither of his three tokens created any investment contract. Finally, he says that his speech and crypto activities are protected by the First Amendment of the US Constitution.

All of these claims, in the HEX, PulseChain, and PulseX founder’s opinion, mean that the SEC has insufficient jurisdiction and grounds to sue.

Another motion to dismiss from a crypto promoter

Topically, the arguments are similar to many other motions to dismiss by crypto executives. A tiny number of these arguments have prevailed while the vast majority have failed. Despite a decade of anti-SEC rhetoric by hundreds of crypto defendants, the SEC has won almost every lawsuit it has filed against crypto promoters.

Of course, the particulars of each case matter. To review Heart’s unique actions, a senior District Court judge will be weighing arguments from government attorneys and Quinn Emanuel attorneys.

Heart has been aware of legal opinions that HEX likely violated US laws since at least 2019. He spoke with attorney Jason Seibert for hours during a legal review of HEX, wherein Seibert told Heart that he believed in “evidence of an unregistered offering on nearly day one. He basically admitted to violations on day one.”

Undeterred, Heart continued promoting HEX for years. He doubled down by founding other crypto assets, PulseChain and PulseX and now awaits a US court ruling on whether his actions were lawful.

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The post Richard Heart claims SEC lawsuit infringes his free speech appeared first on Protos.

On Sunday, a prominent member-turned-critic of Richard Heart’s HEX community, Eric Wall, tweeted an intraday chart of HEX-on-Ethereum’s collapsing price. He was dunking on Heart for allegedly causing the HEX rug pull and crypto members on X (formerly Twitter) duly dogpiled. They laughed, clicking the Like button on tweets about HEX’s supposed collapse tens of thousands of times.

Within hours of Heart’s tweet, HEX-on-Ethereum traded 68% lower.

Read more: Richard Heart and the curious launch of Hex, Pulse, and PulseX

In reality, Heart didn’t rugpull HEX on Sunday. Nor has the value of HEX declined over the past three months.

To explain: HEX exists on two blockchains: Ethereum and PulseChain. Heart started HEX on Ethereum but claimed to migrate his focus to PulseChain in order to spare ‘Hexicans’ from Ethereum’s high fees. PulseChain, he claims, is faster and cheaper.

For context, Heart is an ex-Bitcoin maximalist who defected and created three altcoins: HEX, PLS, and PLSX. HEX is his flagship creation, featuring the ability to lock up HEX on-chain for future rewards. PLS is a fee (‘gas’) token for the PulseChain blockchain, and PLSX is a reward token for its most popular exchange.

The SEC is currently suing Heart, Hex, PulseChain, and PulseX for violating federal securities laws.

HEX on two blockchains

On Sunday, when Heart endorsed HEX-on-PulseChain and disavowed HEX-on-Ethereum, the price of HEX-on-Ethereum did crash -70% intraday (-54% as of publication time). That reduced its fully diluted valuation from approximately $6.4 billion to $2.6 billion as of publication time*: a loss of $3.8 billion for HEX-on-Ethereum.

However, the price of HEX-on-PulseChain increased on Sunday. Specifically, it rallied 11% as of publication time, up from approximately $11 billion to $12.3 billion as of publication time*: a gain of $1.2 billion for HEX-on-PulseChain.

In sum, the fully diluted market capitalization of HEX-on-Ethereum did, indeed, decline more than the offsetting rise in the fully diluted market capitalization of HEX-on-PulseChain.

However, there are two other complicating factors that make it difficult to conclude that Heart meaningfully caused any crash in the value of HEX on Sunday.

No HEX rug pull, just a slow decline

First of all, the launch of PulseChain coincided with a free duplication of all HEX-on-Ethereum (including unstaked and staked HEX) onto PulseChain. Any long-term holder of HEX prior to PulseChain’s debut received free HEX on PulseChain. Therefore, no long-term holder can be harmed by a decline in the value of HEX on Ethereum versus PulseChain — because they own an equal number of tokens on both blockchains.

Secondly, Heart has consistently emphasized the long-term nature of HEX staking. Therefore, considering a trailing period of three months rather than 24 hours, the USD value of HEX-on-Ethereum is trading flat near $0.0046. Over that same period, in contrast, the USD value of HEX-on-PulseChain has increased 60%.

Therefore, on the whole, the fully diluted valuation of HEX across both Ethereum and PulseChain blockchains has actually increased by over $6 billion within three months.

Still no excuse

This does not excuse, of course, the disastrous overall decline in the value of Heart’s altcoins which might never regain their all-time high market capitalization of $85 billion. Nor does it excuse years of sketchy behavior of the evasive founder. Moreover, it doesn’t answer questions about Heart’s lavish personal expenditures or diversions of the ETH and stablecoin collateral that once backed some of the briefly stratospheric valuations of HEX, PLS, and PLSX.

Read more: The SEC can’t get in touch with Richard Heart, now what?

To little avail, Heart tried to point this out. Using his newly preferred nomenclature (referring to HEX-on-PulseChain as simply ‘HEX,’ despite his prior years of using ‘HEX’ in reference to HEX-on-Ethereum), Heart noted that HEX-on-PulseChain rallied 57% intraday on Sunday. That is true. Specifically, HEX-on-PulseChain has a larger fully diluted market capitalization than HEX-on-Ethereum, according to CoinGecko, which makes that 57% rally even more meaningful.

Regardless, skeptics dogpiled onto posts by Eric Wall (600 likes), Pledditor (1,400 likes), Wicked (330 likes), Stacy Herbert (770 likes), Mike Alfred (320 likes), and other crypto influencers. All laughed at the supposedly predictable, inevitable rug pull of HEX that consummated on Sunday.

The problem is that the rug pull didn’t actually occur yesterday. Nor over the last three months.

Instead, the decline in Heart’s altcoins has happened slowly — for the two and a half years since September 2021.

*Note: All market capitalization and price figures use CoinGecko data as of UTC 05:49:00 UTC on Monday, March 11, 2024. There is disagreement about the circulating supply of HEX across both blockchains. For this reason, CoinGecko does not display the market capitalization for either token.

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The post Crypto Twitter dunks on Richard Heart over a 2-year-old HEX ‘rug pull’ appeared first on Protos.

Richard Heart’s three coins Hex (HEX), PulseChain (PLS), and PulseX (PLSX) have lost money for the vast majority of investors. Indeed, the projects are currently worth at least 87% less than their all-time highs.

The market capitalizations for these tokens are also worth far less than the dollar value of the ether used to buy HEX during its launch phase as well as the $1 billion value of all sacrifice-themed crypto investments that unlocked PLS and PLSX.

• PulseX peaked at $0.000139 in May. It’s now trading at less than $0.000012 — a decline of -92%.
• PulseChain shows a similar story with an all-time high of $0.0000278 and a current value of $0.00004352 — a decline of -87%.
• Hex hit an all-time high of $0.55 and has crashed -99% to $0.004.

Near-worthless PLS delisted from its only major exchange

OKX has already announced plans to delist its PLS/USDT spot trading pair. The exchange suspended deposits and plans to freeze trading and withdrawals on August 31. That trading pair on OKX is responsible for over 97% of PLS’ trading volume displayed on CoinGecko.

PulseChain is Richard’s version of Ethereum; PulseX is Richard’s version of Uniswap. As Ethereum users can pay ETH for gas fees to use Uniswap, PulseChain users can pay PLS for gas fees to use PulseX.

HEX, meanwhile, is an older ERC-20 token that trades mostly on Uniswap.

Read more: The Highest of Stakes with Richard Heart encapsulates the narcissism of crypto

The SEC’s billion-dollar lawsuit against Richard Heart

The SEC has filed legal charges against Richard Heart, whose legal name is Richard J. Schueler. Commissioners also named HEX, PulseX, and PulseChain in the lawsuit.

The SEC alleges that Heart misappropriated at least $12 million of his token sales to buy personal luxuries. It cited the 555-carat black diamond widely known as “the Enigma,” which Heart bought in February 2022. The court date for this SEC lawsuit has been set for November 28.

For years, HEX was Richard Heart’s only proprietary token. Eventually, he finished work on his “better than Ethereum” PulseChain and “better than Uniswap” PulseX. However, a delayed and troubled launch was compounded by lackluster performance and an unfortunately-timed HEX crash.

The HEX, PulseX, and PulseChain “army” barely seemed deterred by the challenges, however, expressing confidence that Heart will somehow prevail over the SEC.

Read more: SEC charges Richard Heart and PulseChain with civil fraud

However, despite their confidence, the SEC looks to have the upper hand in this case, given how much Heart has promoted his tokens as investments that could make people rich. He’s certainly never missed a chance to flaunt the luxuries he bought with his allegedly ill-gotten gains, even bringing it up multiple times in the documentary The Highest of Stakes.

The SEC latched onto Heart’s gaudy flashes of wealth as signs that he misdirected some of the investment funds from people who bought HEX, PulseX, and/or PulseChain. Now, the whole ecosystem might be collapsing onto bagholders as their market capitalizations dwindle by the week, and Heart finally starts to face the consequences of his actions.

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The post Richard Heart’s tokens tank as billion-dollar lawsuit looms appeared first on Protos.

I usually start my reviews quite confident of what I’m going to write. For instance, before reading the BitBoy book it was easy to know what I was getting into simply by watching several of his obnoxious YouTube videos.

I figured The Highest of Stakes, a documentary about a cryptocurrency known as Hex and its founder Richard Heart), would be similar. Heart’s real name is Richard Schuler. He’s loud, unpleasant, and narcissistic. Heart volunteered for the documentary and heavily promoted it — so I was sure it’d be another shill-fest.

But The Highest of Stakes is no promotion of Hex. Essentially, it’s a 90-minute version of the scene from The Big Short where Mark Baum asks, “Why are [the mortgage brokers] confessing?” and his coworkers say, “They’re not… they’re bragging.”

The Highest of Stakes and the madness of crowds

The Highest of Stakes opens with investors describing Heart as a “god,” “messiah,” and “benevolent king.” Heart sits down and joyously lists off his assets.

“$10 million in cars, $3 million in watches… and the world’s biggest diamond,” he says (and will repeat at least three times over the course of the film).

In the introduction, the audience is led to believe that they’re simply watching a film about a cult. But the deep realities of Hex appear after the initial round of adoration. First we meet RG3, a self-proclaimed ‘Hexican’ who quits his job by saying something along the lines of “Basically, buddy, I’m the richest man you’ve ever known.”

But RG3 doesn’t want to hoard his brilliant investment. He has to try to help his friends get as wealthy as he is (on paper). So, he ropes in his buddy Mikey.

Read more: Richard Heart’s Pulse launch flops, users stranded, HEX crashes

Mikey states from the get go that he trusts RG3 so much that he’ll often invest in projects “without really knowing what [they are].” He’s married to a really smart woman named Ramey. Besides showing devotion to her family and being a responsible parent, she also seems to be aware that the cryptocurrency industry is a minefield of scams and hustlers.

RG3 and Mikey fully trust Heart but Ramey isn’t even on the fence: she wants nothing to do with Hex. Despite his wife’s protestations, Mikey dumps their entire life savings into the project.

“I bought some [Hex] this morning,” he tells Ramey.

Smiling, she says, “Like a little bit? Not a lot?”

“Yeah, just a little bit.”

“Like how much?”

Exasperated, Mikey says, “Like, I put all of [our house money] in.”

Ramey stops smiling.

A train wreck you can’t look away from

The majority of the film is consumed with two dueling narratives: one is that every financial product boils down to a ponzi scheme, with Richard Heart as the shining example in crypto. The other narrative is that Heart has built a cult of personality on the blockchain based on “number go up” despite no real-world product or use case and is doomed to fail.

Neither of these narratives are particularly compelling. Unfortunately, this means most of the film revolves around the unlikable Richard Heart and two professors, Dr. Kelly Richmond Pope and Dr. Lamont Black, who are keen to look into Hex as a scam but are far too medical in their approach.

Heart perfectly portrays the obscene centimillionaire jerk, but the two pushy professors constantly saying they “don’t get it” is repetitive and doesn’t offer a fair representation of the high quality and intense personalities of some of the strongest Hex opponents, such as Eric Wall. He makes a brief yet memorable cameo saying, “Sorry, Richard, this is the dumbest f*cking thing I’ve ever heard in my entire life.”

Thankfully, even without a proper hero, the villain of Richard Heart is enough to save the reality of the situation.

Hypocrisy and Down Only

Richard Heart is a Louis Vuitton duffle bag of hypocrisy. Scammers will tell you to trust them, he’ll say, and follow it unironically with, “Trust me.”

“I want to be loved,” he says, then admits that obnoxiously flaunting his wealth is how he attracts attention. He attacks the current system, then builds something he claims is an identical product but, ya know, better.

There is a telling moment early in The Highest of Stakes where RG3 says, “Hex is the first real cryptocurrency that actually does something: generates yield.” Generating yield isn’t something you can just do — it comes at a price, always.

Bonds, stocks, and certificates of deposits depend on certain investments, parameters, and market conditions — companies and governments providing real value. Thinking that magically generating yield provides a service is about as uninformed as it gets, and provides the backdrop for why Hex is more than a cult or a multi-level marketing scheme — it’s both.

Read more: SEC charges Richard Heart and PulseChain with civil fraud

This proves to be true in the film. RG3 has to deal with financial difficulties after telling his boss to eat dirt, Mikey literally bought the top and then lost even more money on ‘Pulsechain,’ and Heart looks like little more than an MLM slanging scammer. Hex and PulseChain remain on a downtrend.

Near the end of the film, Mikey’s wife Ramey laughs sadly into the camera and says, “At least I get to be right. How often is the wife right?”

I wish I could let Ramey know she’s been right all along.

The Highest of Stakes encapsulates crypto perfectly

Unlike my previous columns, titled So you don’t have to, the goal of this review isn’t to dissuade anyone from viewing The Highest of Stakes. I think this is a film — a documentation of our time — that is actually worth viewing.

I deeply disagree with the vague conclusion of the film, which avoided taking a stance and tried to leave a “what will happen next?” question hanging at the end. But attempts at neutrality fail in the wake of Heart’s off-putting personality and slew of hypocrisies.

The Highest of Stakes did a fantastic job of showing the insanity of the crypto industry, the narcissism of some of those most entrenched, and why everyone needs to be careful when dipping their toes into the speculative craziness that is cryptocurrency.

Go watch it.

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The post The Highest of Stakes with Richard Heart encapsulates the narcissism of crypto appeared first on Protos.

The Securities and Exchange Commission (SEC) is suing Richard Heart and PulseChain for civil fraud. According to the SEC, Heart, PulseX, and PulseChain also committed a variety of legal violations, including offering unregistered securities to US investors.

According to the SEC, Heart’s three crypto assets — Hex (HEX), PulseChain (PLS), and PulseX (PLSX) — were and are unregistered securities.

The SEC says that Heart controls these three “unincorporated entities.” Through these projects, Heart notionally raised more than $1 billion worth of crypto assets from investors.

For years, Heart has operated these entities while globe-trotting to avoid legal service. Indeed, lately, he’s been hiding out in Finland. However, according to the SEC, his claims to be outside of US jurisdiction failed when he offered HEX, PLS, and PLSX to US investors.

Moreover, his transactions occurred on Uniswap, the developers of which work at a headquarters in Brooklyn, New York.

Validates Protos’ coverage of Richard Heart and the SEC

Protos has reported on Heart (real name, Richard Schueler) during the past year, starting with one of the most definitive historical accounts of Hex, the lengthy delays of Pulse, and the disappointing launch of PulseX. As of today, the SEC alleges that Heart and PulseChain defrauded investors by misappropriating funds, which is a civil fraud charge.

Read more: Richard Heart followers lose faith as PulseChain, PulseX face delays

The SEC’s legal complaint provides details on Heart’s ETH– and HEX–recycling transactions “that enabled Heart to surreptitiously gain control of more Hex tokens.” Specifically, the SEC alleges that between December 2019 and November 2020, Heart’s Hex public wallet address received 2.3 million ETH (then worth $678 million). However, 94-97% of these ETH deposits were “recycling” transactions directed by Heart or other insiders.

Attorney Jason Seibert comments on suit

Attorney Jason Seibert said today on a Twitter Space: “As we pointed out nearly four years ago on Tone Vays’ 2019 Bitcoin Law Review, it was ridiculous that Richard Heart claimed his offering was not a securities offering… Heart was saying HEX is a certificate of deposit but yet it’s somehow not a security.

“When we asked him point-blank who was behind the Origin Address, he said he wasn’t going to say and would never say, because he did not want to run afoul of the SEC’s Howey Test. To me, that was prima facie evidence of an unregistered offering on nearly day one. He basically admitted to violations on day one.”

Someone in the audience asked Seibert about a possible criminal charge against Heart. He replied, “the DoJ is happy to let the SEC do discovery, do their work, get something first on the civil side, which then creates a basis for the possible arrest warrant in the future.” According to Seibert, this civil filing could possibly lead to a felony charge against Heart.

Heart is also the subject of an upcoming documentary movie called The Highest of Stakes which is scheduled to premiere in Miami this week.

Read more: Richard Heart’s Pulse launch flops, users stranded, HEX crashes

On another Twitter Space, Heart’s one-time friend turned critic Eric Wall said, “Hex was never listed on major crypto exchanges because, when those exchanges would check for ownership stats, they would find that Richard owned almost all of the supply.

“That made it so that Hex was basically only listed on Uniswap. Hex was a ‘pioneer’ of DeFi because Richard had no other choice. So, it’s not insane to me that Richard was able to spin up this cult. He has literally read books on how to create cults. I think it’s called The 48 Laws of Power.

“That book outlines these things he did, like sacrifices, adorning himself in jewelry, claiming to be a self-made millionaire, and always claiming the source of his wealth came from elsewhere. Richard applied the lessons from that book almost verbatim. His personality and charisma fit a cult perfectly.”

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Edit 18:20 UTC, Aug 1: The article originally stated that Richard Heart had personally funded an upcoming documentary about himself. However, the film is, in fact, funded by private investment.

The post SEC charges Richard Heart and PulseChain with civil fraud appeared first on Protos.

Fans of Richard Heart awaited the launch of his magnum opus, Pulse, with bated breath. They forgave HEX for languishing 80% below all-time highs — or worse — while they waited. They forgave months of delays, SEC subpoenas, and hundreds of millions of dollars worth of inaccessible funds.

Finally, after four testnets and inexplicable postponement, Heart’s blockchain and its DEX activated mainnet on May 13. A bridge to other blockchains went live two days later.

The chart of Heart’s first project HEX illustrates the “sell the news” dump of Pulse. In Wall Street parlance, sophisticated traders buy amid rumors and sell into retail buying on the day of the news — hence the adage, sell the news.

From May 1 through May 22, neither PulseChain (PLS) nor PulseX (PLSX) had any major exchange listing. HEX was the only asset of Richard’s three tokens with liquid, independent price discovery. HEX is therefore the best measure of the value of Heart’s empire.

To that end, consider the price of HEX.

• On May 11, HEX rallied to a 52-week high of $0.08 per token amid rumors of an imminent Pulse mainnet activation.
• Its market capitalization crested at $13 billion.
• By launch time on May 13, HEX had lost one-third of its value to approximately $0.05 per token — just shy of a $10 billion market cap.

Then, on launch day itself, everyone realized the party was over. Smart money had already sold the news. HEX halved within 24 hours to $5 billion. In subsequent days, HEX has continued to sell-off and now trades below $0.02 per token around its 52-week low market cap of $2.2 billion.

Barrage of gas fees and slippage slams HEX fans

The point of Pulsechain (a fork of Ethereum) and its on-chain exchange, PulseX (a fork of Uniswap), was to reduce fees. However, most fees haven’t reduced at all.

Gas fees for a full sequence of transactions using Pulse are prohibitively expensive, with documentation and how-to guides in disarray. Would-be Pulse users need to pay gas fees for:

• Bridging assets onto Pulsechain, 
• Activating multiple DEX trading pairs on Pulsechain,
• Swapping non-Pulsechain tokens into Pulsechain tokens (plus MEV and slippage),
• Providing and removing liquidity (plus impermanent loss),
• Trading on Pulsechain (plus MEV and slippage), 
• Swapping Pulsechain tokens into bridgeable assets (plus MEV and slippage), and
• Finally, another suite of gas fees for transferring the bridgeable assets back to the original blockchain.

Heart waves away focus from these inundating fees with disingenuous promises about Pulsechain being “150X cheaper” than Ethereum. In reality, most PulseX users are stranded at best or underwater at worst. 

Pulse sacrificers: Locked and losing

For instance, consider sacrificers just for PulseX who finally received their mainnet PLSX on May 13. Prior to May 23, there was no exchange for these users to acquire PLS for gas fees to move their PLSX tokens. In actual effect, therefore, all of their funds remain immovable.

Sniffing an opportunity for easy money, an opaque network of over-the-counter dealers set up price-gouging offers, charging users prices like $0.10 for PLS despite its actual value being 99.9% cheaper. Some scammed users out of funds by promising to send PLS in exchange for assets that they simply stole. Faucets tried to give away PLS and immediately depleted amid the chaos. 

The public slowly learned the stark reality. The value of HEX and PLSX crashed relentlessly.

Today, PLS has retained some value, but mostly because gas-starved PLSX users have millions of dollars worth of locked funds that require PLS in order to sell. The bid of stranded PLSX users is one of the few sources of PLS demand — and the bid mostly exists so that they can sell.

Read more: Richard Heart followers lose faith as PulseChain, PulseX face delays

Fake Pulse and price-gouging OTC dealers

Of course, PLSX users encounter an infuriating sequence of gas fees for each step of their attempts to sell. Consider the above, typical PLSX tokenholder. Prior to May 23, they might have attempted to buy PLS over-the-counter at a rate like $0.10. Even if they bought $200 worth of PLS, they would have received less than $1 worth of PLS after its fair revaluation from $0.10 to $0.0002. Not enough gas even for a single swap.

If the user managed to find a cheaper venue for buying even more PLS, they might have been able to buy a PLS-lookalike — but likely the wrong type. There are dozens of fake versions of PLS. Comically, even the official Pulsechain bridge doesn’t output native PLS. Scores of PLSX users have wasted money trying to buy the wrong type of PLS — or real PLS at price-gouged rates.

Once a dwindling minority of lucky users managed to find enough PLS to conduct all of the on-chain steps required to actually sell their PLSX (see the above barrage of bullet points), they find limited liquidity, massive slippage, and little support.

In short, the patience of Heart’s fans is running thin. His flagship project, HEX, is trading near 52-week lows. Many questions remain regarding his sales of the funds that he raised during the launch of HEX, Pulse, and PulseX. This collateral — mostly ETH and stablecoins — is one of the few things left backing confidence in his schemes.

Selling the collateral but not HEX, Pulse, or PulseX directly

HEX is trading near 52-week lows. PLSX has no major exchange listings. PLS trades on just two exchanges at prices below $0.0002.

In the opinion of Tone Vays, the real source of Richard Heart’s wealth is not any of these three tokens at all. Instead, Vays believes that Richard sells the ETH and other assets raised during the launch of these projects.

“He dumped all the Ethereum that people paid on day one to get his coins,” Vays said. 

Heart responded to that claim, “No comment, Tone. I got a lot of really cool stuff. I’m selling something for it, ain’t I?”

Indeed, Richard might never need to sell any meaningful amount of HEX, PLS, or PLSX. If he has sold the ETH, stablecoins, or other collateral backing those tokens, those sales would have made him a multi-millionaire. Even better for his brand, he could honestly claim to have never sold any of his projects’ tokens directly.

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The post Richard Heart’s Pulse launch flops, users stranded, HEX crashes appeared first on Protos.

Like many dubious crypto leaders, Hex creator Richard Heart has amassed a cult of personality through outrageous videos and gaudy displays of wealth. In February, he bought the largest diamond in the world for $4.3 million in crypto. The four billion-year-old wonder was renamed the Hex.com diamond.

Heart keeps many secrets. Past known aliases include James Hart and J. Heart. He was born Richard James Schueler on October 9, 1979. He grew up in Pittsburgh.

Nowadays, he hides the location of his residence, refuses to answer questions regarding his net worth, if he controls Hex’s Origin or Flush addresses, and most importantly, how much Ethereum he received from the proceeds of the Hex launch.

During a recorded Twitter Spaces conversation, Heart was accused by former colleague-turned-critic, Tone Vays: “…he dumped all the Ethereum that people paid on day one to get his [Hex] coins.”

After an awkward moment of silence, Heart responded, “No comment, Tone. I got a lot of really cool stuff. I’m selling something for it, ain’t I?”

In another conversation with Eric Wall, Richard outlined a scheme even more explicitly. “Let’s pretend you launched a coin, and you raised money. And then you put that money into Ethereum. And then Ethereum went up 40X, and you dumped that s**t, and you had a f*****g stack of cash. I bet if you reinvested in your original coin, you could have actually net put more into that coin than you took out. Do you know what I’m saying?”

Wall responded, “No.”

Heart replied, “No? You don’t get it? OK. Well, I can’t say it any more clearer.”

Although Heart repeatedly glomars all public questions about his control of Hex’s origin or flush addresses, he’s rumored to be their ultimate beneficiary.

The origin address receives a copy of all token rewards minted by users upon maturity of their time stake. It receives half the penalties for early withdrawal; the other half goes into a payout pool. The address also receives a copy of bonuses. It currently holds over $11 million (268 million Hex).

The Flush address receives Hex tokens from a smart contract function involving late penalties. Users agree to a strict schedule when initiating a Hex stake – if they don’t end their stake on time, the Flush address can ultimately receive some of their penalty fees.

• The Flush address once held $6.5 million in Ethereum and has been drained of most of its receipts.
• An estimated 2,387,391 ether have been moved out from a suspected Flush address in a series of transactions that began on December 12, 2019 and ended on January 27, 2021.
• If Heart does control all assets in the Origin, Flush, and other Hex wallets listed above, Heart could control up to 88.19% of Hex’s total supply.

The illusory wealth of Heart’s Hex

If Heart controls Hex’s Origin Address as well as the sacrifice addresses for Heart’s PulseChain and PulseX, he could have once achieved billionaire status on paper.

One particular wallet, 0x12136e543b551ecdfdea9a0ed23ed0eff5505ee0, is widely rumored to belong to Heart. It held $400 million on February 17, 2021. Today, the wallet contains less than $10,000 and has routed crypto assets to dozens of wallets and exchanges including Binance, Huobi, OKEx, Bitfinex, Poloniex, Bithumb, and Deribit.

Hex is a crypto asset that Heart claims is a blockchain-based Certificate of Deposit (CD). Its name appropriates credibility from the popular belief that CDs are considered to be “one of the safest savings options.” However, as opposed to a real CD that a bank uses to collateralize mortgages or productive loans, Hex simply time-locks tokens in exchange for future token rewards.

Hex has a multi-billion dollar mark-to-market capitalization – but in crypto, wealth can be illusory. Unregulated, ostensibly decentralized exchanges (DEXs) permit anyone to create a token with an arbitrary supply, and list it for trading.

Here, a user can simply add a capriciously small amount of liquidity and transact a few times to set the price of any newly created asset. Because market capitalization is a simple multiplication of price by supply, it’s simple to create a high market cap token.

Along these lines, Heart’s Hex is very thinly traded with a high market cap exceeding $7 billion. Despite a market cap exceeding $8 billion, CoinMarketCap reports less than $10 million worth of Hex transactions occur in a typical day.

For comparison, Ethereum has a market cap of $200 billion and over $27 billion worth of Ethereum traded today.

January 6, 2020: An historic day for Hex and Heart

Hex had a 12-month launch phase. Early on, participants obtained Hex by sending Ethereum to a recurring daily auction called the Adoption Amplifier. Heart also set up a Hex giveaway to bitcoin holders at a rate of 10,000 Hex per bitcoin.

Many participants in the launch of Hex were disappointed by its topsy-turvy construction. Unlike most launches that reward early adopters, Hex rewarded latecomers with an even allocation of Hex by day. This counterintuitive structure penalized early adopters who crowded into Hex’s first day. Instead of a reward for being early, Hex penalized them with a lower proportion of Hex than they could have received for the same amount of money weeks later.

On the vast majority of his livestreams since, Heart mentions the steep return on investment for those who bought at Hex’s January 6, 2020 low. However, average transaction volume on that day was approximately $5,000. In contrast, many millions of dollars worth of Hex transacted during its all-time high in September 2021.

Stated another way, there was a vanishingly tiny opportunity to purchase Hex at its low, yet a massive opportunity to purchase Hex at its all-time high.

Another peculiarity: there were 36 outgoing transactions from Hex’s Adoption Amplifier on that date. Each transaction sent exactly 1,337 Ethereum (approximately $192,000 apiece at the time). In old hacker slang, 1337 means “elite.”

Crypto Weekly Review alleges that the controller(s) of those 36 wallets used these “elite” allocations to manipulate Hex’s spot price so that it matched the Adoption Amplifier’s price for Hex – an accusation that Protos has not yet been able to corroborate.

PulseChain and PulseX

In 2021, Heart created two ingenious methods for locking up large quantities of Hex’s supply: PulseChain and PulseX.

PulseChain is a slightly modified version of Ethereum; instead of ETH, its native asset is PLS. Coinciding with the creation of his blockchain, Heart raised $27 million for charity.

Heart is also creating an on-chain exchange, PulseX, that will operate on the PulseChain blockchain. PulseX will use its own token, PLX. Users sacrificed over $1 billion to participate in the launch.

In order to get financially involved in Heart’s two new projects, Heart asked users to “sacrifice” tokens of monetary value like Ethereum, stablecoins and, critically, Hex. Over 2,182,205,786 Hex are now locked inside sacrifice wallets for PulseX and, importantly, cannot be sold by their prior owners.

Combined, “sacrificers” to these two projects have locked up $11 billion worth of Hex’s notional supply.

Although stopping short of a guarantee, Heart has repeatedly told sacrificers that they will likely receive a commensurate airdrop of PLS and PLSX tokens — corresponding to their sacrifice amount — when these protocols launch their mainnets.

Alleged security likeness of the Hex offering

Bitcoiner Tone Vays once hosted a seven-hour discussion about Hex with Heart and two lawyers. According to attorney Jason Seibert’s analysis during this call, Heart’s offering of Hex probably passed the SEC’s Howey Test and was, in his non-binding opinion, an unregistered securities offering. Seibert has been an attorney for crypto defendants since 2014 when he served as Trendon Shavers’ civil defense counsel – known as the first bitcoin securities-fraud case.

Hex’s staking program advertises annual interest rates of approximately 37% to stakers – a seemingly security-like investment opportunity. However, Heart argues that because users stake and redeem token rewards themselves directly with Hex’s smart contract, there’s no promise of any return based on the efforts of others.

In his view, users can earn up to 38% extra Hex tokens annually by staking and interacting with Hex’s smart contract by themselves. To date, the SEC has not commented publicly on Heart nor Hex.

For more informed news, follow us on Twitter and Google News or listen to our investigative podcast Innovated: Blockchain City.

The post Richard Heart and the curious launch of Hex, Pulse, and PulseX appeared first on Protos.