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.

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.