Furthermore, Heart also allegedly designed and marketed a so-called “staking” feature for Hex tokens. He claimed these would deliver returns as high as 38 per cent. The complaint further alleges that Heart attempted to evade securities laws by calling on investors to “sacrifice” (instead of “invest”) their crypto assets in exchange for PLS and PLSX tokens.

The desired outcome

The SEC’s complaint, filed in the US District Court for the Eastern District of New York, alleges that Heart, Hex, PulseChain, and PulseX violated the registration provisions of Section 5 of the Securities Act of 1933.

The complaint also alleges that Heart and PulseChain violated the antifraud provisions of the federal securities laws. As a result, the complaint seeks injunctive relief, disgorgement of ill-gotten gains plus prejudgment interest, penalties, and other equitable relief.

“Heart called on investors to buy crypto asset securities in offerings that he failed to register. He then defrauded those investors by spending some of their crypto assets on exorbitant luxury goods,” said Eric Werner, director of the Fort Worth Regional Office. “This action seeks to protect the investing public and hold Heart accountable for his actions.”

Ongoing investigation

The SEC’s continuing investigation is being conducted by Jaime Marinaro and Derek Kleinmann of the Fort Worth Regional Office. They have assistance from Jamie Haussecker. The investigation is supervised by Sarah S. Mallett and Eric Werner of the Fort Worth Regional Office and by Jorge G. Tenreiro and David Hirsch of the Crypto Assets and Cyber Unit. Lastly, the litigation will be conducted by Matthew J. Gulde and supervised by B. David Fraser.