The U.S. Securities and Exchange Commission (SEC) said it is suing Richard Schueler, known online as Richard Heart and his three crypto projects, Hex, PulseChain and PulseX, for conducting unregistered offerings of “crypto asset securities.”

The unregistered offerings raised more than $1 billion in crypto from investors, the agency stated.

Heart and PulseChain also were charged with fraud “for misappropriating at least $12 million of offering proceeds to purchase luxury goods including sports cars, watches, and a 555-carat black diamond known as ‘The Enigma’ – reportedly the largest black diamond in the world.”

PulseChain launched in May, and PulseX is the exchange on its blockchain that allows users to exchange other tokens on its network, according to its website.

The two entities were off to a rocky start due to their connection to Hex and some community members’ concerns about its fundamentals. Hex has been around since 2019 and doesn’t have a stellar reputation because many market players view it as a scam due to its advertisements as the first “blockchain certificate of deposit.” It claimed that users who stake its token could mine new coins with high APYs and deposits are worth “trillions of dollars” and are “worth more than gold, credit card companies and cash.”

With that said, Hex claims it’s not a scam, and even has a page on its website dedicated to clarifying itself.

The SEC echoed that Heart allegedly created the “staking” feature for HEX tokens, which he claimed would provide yields as high as 38%, the agency stated. 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.”

From December 2019 to November 2020, Heart and Hex allegedly offered and sold HEX tokens in an unregistered offering, bringing in over 2.3 million ether, worth about $4,271,468,000 at present value, the SEC stated.

The SEC also alleged that between July 2021 and March 2022, Heart created two additional unregistered crypto tokens, PLS and PLSX, that raised hundreds of millions in crypto to support PulseChain and PulseX, respectively.

The price of the HEX, PLS and PLSX tokens fell 24%, 25% and 42%, respectively, on Monday after news of the SEC’s complaint.

In recent months, the SEC has ramped up efforts to crack down on the crypto industry, going after companies big and small for alleged securities violations, fraud, and other activities. As the agency continues to scrutinize the space, we could well see other firms facing lawsuits in the coming months.

All in all, the SEC’s issue is with companies treating crypto assets as securities, something that the industry and other government regulatory bodies don’t agree on.

Earlier this month, a federal court ruled that the XRP token, used for the Ripple blockchain, is not a security when sold to the broader public, but could be considered as one for institutional sales. The SEC had alleged in its case that Ripple and two executives had raised $1.3 billion in an alleged “unregistered, ongoing digital asset securities offering.”

Stu Alderoty, chief legal officer of Ripple Labs, told me on TechCrunch’s Chain Reaction podcast that the ruling could potentially provide clarity for other pending lawsuits. “I think our case and the decision rendered by our judge will provide comfort to other judges that the SEC is just misguided.”

But, he said, the question that policymakers and lawyers should be asking is, “What’s the best regulatory framework that we can create that protects the integrity of the market?”