The Richard Heart Deception: How HEX's Founder Orchestrated a Multi-Layered Fraud

In July 2024, the U.S. Securities and Exchange Commission filed civil charges against Richard Heart (born Richard Scheuler), the founder and promoter of HEX, PulseChain, and PulseX. This case represents a watershed moment in crypto regulation—not because it addresses gray areas of securities law like the Ripple case, but because the SEC explicitly alleges outright fraud. Richard Heart’s schemes went far beyond regulatory ambiguity into deliberate deception, revealing how one figure can systematically manipulate both technology and human psychology to extract wealth.

SEC Uncovers Massive Fund Recycling Scheme in HEX Presale

The most shocking allegation reveals that Richard Heart and his associates didn’t actually attract hundreds of millions in legitimate investment. Instead, they recycled investor funds through what’s called the “Hex Flush Address”—a mechanism that collected fees and held presale funds but, according to the SEC, remained under Richard Heart’s control.

The scheme worked like this: funds would be moved from the Flush Address to an external exchange, then sent back into HEX’s contract address disguised as new investor capital. This created an illusion of massive presale success. The SEC alleges that 94-97% of the stated $678 million in ETH contributions were actually recycled funds, meaning genuine investor capital was closer to $34 million. This wasn’t a minor accounting error—it was a coordinated effort to fabricate demand and attract more victims into an inflated project.

What made this particularly damaging was that the recycling left Richard Heart holding an overwhelming majority of HEX tokens while appearing to be just another stakeholder. By controlling the narrative of success through artificial volume, he could shape market perception while maintaining massive token concentration—the classic structure of a pump-and-dump operation.

The Fake Staking Trap: Why HEX’s Returns Were Always Hollow

Beyond the presale manipulation, the SEC identified a second deceptive layer: HEX’s entirely fabricated staking program. Legitimate proof-of-stake systems require validators to secure blockchain transactions through real technical work. This creates genuine economic incentives—validators earn rewards because they’re performing necessary functions.

HEX’s staking was fundamentally different. The program offered high returns simply for locking up tokens for extended periods. But here’s the critical problem: for its first years, HEX didn’t even operate its own blockchain, making traditional staking technically impossible. The so-called “staking rewards” served one purpose only: to keep HEX tokens off the market and artificially support prices—a goal Richard Heart publicly admitted.

The SEC’s analysis reveals how exploitative this structure was. Staking incentives weren’t generated from real fee revenue; they came from newly printed HEX tokens—essentially unbacked subsidies that guaranteed eventual collapse. Stakers got victimized twice: first they bought worthless tokens for real money, then they surrendered those tokens in exchange for smaller amounts of worthless tokens distributed over time. Some faced a third extraction layer when failing to withdraw on schedule triggered penalty fees—money that conveniently flowed back to Richard Heart through the Flush Address.

This mirrors the fundamental flaw that destroyed Terra: subsidized returns with no underlying economic production. When you base a system on perpetual money printing rather than real utility, mathematics guarantees failure.

No Real Utility, No Real Value: The Fundamental Flaw

The core issue underlying all HEX mechanics is simple: the token serves no actual purpose. Richard Heart’s explicit goal was designing an asset that only increased in price—not an asset that accomplished anything technological or economically productive. A certificate of deposit mechanism dressed up in blockchain language doesn’t create utility; it creates dependency and collapse.

Without real utility generating organic demand, a token inevitably approaches zero value regardless of how sophisticated the financial engineering appears. This fundamental principle—that tokenomics cannot override the need for actual use cases—explains why billions in “innovative” crypto projects eventually evaporate.

The Richard Heart Playbook: Comparison to Terra’s Collapse

The parallels between HEX and Terra’s Do Kwon scheme are striking. Both featured:

• Flawed financial models reliant on leverage and lockups
• Subsidized returns disconnected from real revenue
• Charismatic founders who became the project itself
• Explicit focus on “number go up” rather than functional innovation
• Explicit SEC/regulatory determination of fraud

This pattern reveals a replicable blueprint: gather an audience through charismatic promotion, create mechanics that lock in capital, generate artificial returns through token printing, and extract value before the system collapses. Richard Heart followed this playbook with precision.

How Richard Heart Targeted Investor Psychology

Understanding why investors believed in Richard Heart requires acknowledging a uncomfortable truth: he targeted greed with sniper precision. His Gucci-draped public image and unabashed focus on price appreciation attracted people motivated by wealth accumulation rather than technology evaluation. He collected investors who envisioned becoming rich, not people asking tough questions about financial models or technical functionality.

The strategy worked because greed aligns with confirmation bias. Investors didn’t want skeptical analysis; they wanted permission to believe in easy profits. Richard Heart provided that permission while maintaining control of the tokenomics.

The Market’s Final Verdict

The market’s response tells the complete story. After the disappointing PulseChain launch, HEX already faced 50% crashes. By the time SEC charges landed, those who bought after the initial presale had already lost up to 99% of their investment. The promised wealth accumulation became the exact opposite.

This outcome wasn’t accidental or unfortunate market conditions—it was the inevitable consequence of a system designed as a confidence game. Once growth stopped and new investor capital dried up, the entire structure collapsed because it never rested on genuine productivity or utility.

Richard Heart’s fraud case matters not because it represents regulatory overreach but because it demonstrates what regulatory clarity looks like. The SEC didn’t need to parse technical distinctions; the facts were straightforward. A founder recycled investor funds, fabricated returns through token printing, and deliberately misled participants about the project’s technical capabilities. These are frauds, plain and simple, backed by detailed evidence and on-chain transaction analysis.

The crypto industry advances not by defending con artists but by clearly identifying and excluding them.