- The SEC has filed a complaint against HEX founder Richard Heart, accusing him of orchestrating unregistered offerings and defrauding investors
- Heart began marketing Hex in 2018 as a high-yield “blockchain certificate of deposit,” collecting over 2.3 million ETH
- Heart is accused of misappropriating at least $12 million through his alleged sale of securities
In one of the most inevitable and obvious cases in all of crypto history, HEX founder Richard Heart was yesterday charged with securities fraud by the Securities and Exchange Commission (SEC). Heart, who is known for sporting luxury cars and gaudy designer clothes, was accused of spending “at least” $12 million of investors’ money on such purchases thanks to the sale of his HEX coin in 2019 and beyond, which he called the world’s first high-interest blockchain certificate of deposit. In reality, the SEC argues, it was just a get-rich-quick scheme that falls very clearly under securities laws.
HEX Called a Scam at its Inception
Heart launched HEX, which means ‘spell’ in the magical context, in 2019, claiming that it was “worth more than gold, credit card companies, and cash.” HEX’s value was supposed to derive purely from its potential to increase in value by simply sitting there locked up in itself, which didn’t seem to represent anything of a concern for potential investors. The token spiked to $0.50 during the 2021 bull run but has since dropped to around $0.006, taking into account the 40% drop following the announcement of the charges against Heart.
HEX was pegged as a scam right from the off by many, who pointed to the years-long lockups which were necessary to unlock the rewards, as well as the way in which the project was marketed purely as a money-making vehicle.
https://t.co/Ywomnycnn8 might be the best opportunity of your life. HEX is designed to go up over 10,000x in only 2.5 years. HEX is FREE for Bitcoin holders! #Ethereum can be transformed into HEX. Imagine you could buy #Bitcoin for $1 in 2011. Don’t miss that chance again! #ETH
— HEX.com 40% APY & 3866x price in 558 days!⬣🚀🌘 (@HEXcrypto) December 27, 2019
It certainly turned out to be a money-making vehicle for one man. The SEC alleges that Heart raked in more than $1 billion as people swapped their ETH for HEX, at least $12 million of which he allegedly misappropriated, purchasing “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 Collected 2.3 ETH
The SEC alleges that Heart began selling HEX from December 2019 through November 2020, which they argue qualified as an unregistered offering, collecting more than 2.3 million ETH. These sales continued again between July 2021 and March 2022, with Heart orchestrating two additional fundraising events that raised hundreds of millions of dollars in various crypto assets. These funds were purportedly meant to support the development of two new ventures – PulseChain and PulseX – each accompanied by their respective native tokens, PLS and PLSX. As those unfortunate enough to have visited his social media posts will know, they almost certainly didn’t go on this.
The SEC also took issue with Heart’s staking scheme which saw HEX holders lock up their tokens for up to five years in return for returns as high as 38 percent. The SEC contends that this feature was part of Heart’s deception, as Heart encouraged investors to “sacrifice” their crypto assets instead of investing them in exchange for PLS and PLSX tokens.
The SEC’s complaint seeks injunctive relief, disgorgement of ill-gotten gains with prejudgment interest, penalties, and other equitable remedies, which would almost certainly see Heart having to hand back his luxury clothes, rings and cars.
Heart has not commented on the charges, but his most recent tweet offers a taste of the kind of irony that could be about to come during any court case:
#Crypto, gotta ask you, what’s it like getting hacked and exploited all the time?
— Richard Heart (@RichardHeartWin) July 31, 2023
Indeed.
