Richard Heart, founder of blockchain projects PulseChain and HEX, was served with a lawsuit by the U.S. Securities and Exchange Commission (SEC) on Oct. 31 for alleged fraud and unregistered securities sales.

In a Dec. 11 filing, the SEC detailed serving the lawsuit, adhering to Finnish law and the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents. Heart resides in Helsinki, Finland. Heart was charged by the SEC on July 31, 2023.

The lawsuit accuses Heart, who operates under the entities Hex, PulseChain, and PulseX, of selling unregistered securities over a span of three years and misappropriating funds for personal use.

Fraud allegations

The SEC’s initial complaint on July 31 alleged that Heart defrauded investors and engaged in the unregistered sale of crypto securities through his entities. These entities, each with its native token, were collectively involved in raising over $1 billion.

The SEC highlighted Heart’s role as the controlling force behind these projects, promising investors substantial wealth. However, it is alleged that a portion of these funds, approximately $12 million, was diverted by Heart for personal luxury expenditures, including sports cars, watches, and a 555-carat black diamond named “The Enigma,” rebranded as the “HEX.com diamond.”

Heart has publicly criticized the SEC, claiming his efforts in the crypto industry have been more effective in protecting investors than the regulator’s. According to a video clip that resurfaced from January’s HexConference, Heart accused the SEC of attacking beneficial aspects of the crypto world and neglecting to address significant industry malpractices. He also argued that his projects, including HEX, PulseChain, and PulseX, should not be classified as securities under the Howey Test, emphasizing their decentralized nature and the lack of expectation of profit from their buyers.

Heart launched HEX in December 2019 and quickly attracted scrutiny from industry analysts and experts. Marketed as the first high-interest blockchain certificate of deposit, HEX was announced with the promise of unprecedented growth, claiming potential returns exceeding 10,000x within two and a half years. The project received an influx of over 33,000 ETH, equivalent to approximately $5 million at the time, in what was termed “donations” that were converted into HEX tokens.