The US Securities and Exchange Commission (SEC) has filed an opposition brief in response to Hex founder Richard Heart’s attempt to dismiss the $1 billion securities fraud lawsuit. The SEC argued that Heart’s motion failed to address the well-supported allegations in the complaint and disregarded relevant legal standards. Despite Heart’s argument that the regulator lacks authority due to his residence abroad and lack of presence in the US during the relevant period, the SEC asserted its jurisdiction over the case.
According to the official SEC document, Heart marketed Hex as a crypto asset security from December 2019 to November 2020, promoting it as a “blockchain certificate of deposit” with the promise of continuously increasing token holdings through staking. Heart’s claims of high returns and the assertion that Hex was the “highest appreciating asset ever” led to a significant investment of $678 million worth of ETH. Despite these promises, Hex’s value reportedly dropped by approximately 98.4% from its all-time high by July 2023.
The SEC additionally highlighted Heart’s involvement in subsequent ventures, PulseChain and PulseX. Heart was accused of raising over $354 million for PulseChain by soliciting “sacrifices” of crypto assets, which were allegedly used for personal luxury items such as high-end watches, cars, and a purportedly large black diamond. It was reported that Heart misappropriated $12.1 million for these luxury purchases by moving approximately $217 million through a series of transfers and a crypto mixer. Moreover, the SEC noted that PulseChain and PulseX did not launch as promised until May 2023, long after the fundraising periods had concluded.
The SEC emphasized that Heart’s marketing efforts were heavily targeted at US investors, pointing to virtual appearances at conferences in Las Vegas and an in-person interview on a Miami-based podcast. These actions further supported the case for US regulatory oversight. Despite Heart’s claim that the SEC’s case infringes on his free speech rights, alleging that using his commentary to infer securities offerings could suppress protected speech on the blockchain, the SEC continues to pursue the securities fraud lawsuit against him.
The SEC’s opposition to Heart’s motion to dismiss the $1 billion securities fraud lawsuit highlights the serious allegations and jurisdictional claims against the Hex founder. The accusations of misrepresentation, misappropriation of funds, and marketing violations underscore the importance of regulatory oversight in the cryptocurrency industry.
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