Why I Don’t Feel Bad for HEX Founder Richard Heart’s Victims

On Monday, July 31, the U.S. Securities and Exchange Commission (SEC) 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 associated tokens, which have already been disemboweled by the continued dump after the disappointing launch of Pulsechain, dropped another 50% or more on the news.

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. Notably, that makes this a dramatically different situation than Ripple Labs’ legal battle with the SEC. That case is limited to the question of securities violations, which is why it has been seen as an important bellwether for the broader crypto industry.

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But the SEC claims that Richard Heart and his projects are simply frauds. While we haven’t yet seen any criminal charges from the U.S. Department of Justice, those might come later, as they did in the case of Terra founder Do Kwon. Because Richard Heart has clearly been up to no good.

Richard Heart flushed your money (and it all went down)

The most scandalous new claim made by the SEC is 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.

This means, first, that actual investment in the Hex project was far lower than it appeared. The SEC claims that recycling constituted 94%-97% of supposed investments sent to the contract address. So instead of the equivalent of $678 million worth of ETH, the HEX presale actually attracted roughly $34…