The U.S. Securities and Exchange Commission (SEC) has filed a series of civil charges against Richard Heart, born Richard Scheuler, the founder and relentless promoter of the related Hex, PulseChain and PulseX projects. The charges come after nearly five years of warnings from crypto watchers that these projects were scams – and the SEC agrees, including fraud amongst the allegations against Scheuler.
The SEC claims that Richard Heart and his projects are simply frauds, and that Heart and his allies “recycled” investor funds during the initial presale of HEX, the earliest of the three projects, between 2019 and 2020. This recycling was done via the so-called “Hex Flush Address,” which receives various fees from Hex users, and also acted as a holding address for investor funds during the initial HEX sale.
The SEC alleges that Heart and associates moved funds from the Flush Address to a centralized exchange through a series of obscuring transactions. Heart then allegedly sent that money back to the Hex “Contract Address,” disguised as money from new investors.
The SEC also notes that the Potemkin staking program’s advertised returns were not derived from fee revenue being generated on the chain. Notably, this was also the fundamental problem with Do Kwon’s Terra chain, which ultimately rested on subsidized and inflated returns through the Anchor Protocol.
Investors who bought in after the initial HEX presale have currently lost as much as 99% of their money.