The US Securities and Exchange Commission has taken a firm stance against Hex founder Richard Heart’s efforts to dismiss the $1 billion securities fraud lawsuit filed against him. In a recent opposition brief filed in a New York federal court, the SEC argued that Heart’s motion to dismiss fails to address the well-supported allegations in the complaint and disregards relevant legal standards. The SEC made it clear that it holds jurisdiction over the case, despite Heart’s claims of residing abroad and having no presence in the US during the relevant period.
According to the SEC’s official document, Richard Heart marketed Hex as a crypto asset security from December 2019 to November 2020, portraying it as a “blockchain certificate of deposit” that promised consistent growth in token holdings through staking. Investors were lured in by Heart’s claims of high returns and the assertion that Hex was the “highest appreciating asset ever,” resulting in a significant influx of $678 million worth of ETH. However, the SEC highlighted that Hex’s value plummeted by approximately 98.4% from its peak as of July 2023.
The SEC also brought up Heart’s involvement in subsequent ventures like PulseChain and PulseX. It accused Heart of raising over $354 million for PulseChain by soliciting crypto asset “sacrifices,” which were allegedly used for personal indulgences such as luxury watches, cars, and extravagant purchases like a large black diamond. To conceal these transactions, Heart purportedly engaged in a series of transfers and used a crypto mixer to misappropriate $12.1 million for his own benefits. Additionally, PulseChain and PulseX failed to launch as promised until May 2023, long after the fundraising periods had ended.
The SEC pointed out that Heart’s marketing efforts were heavily geared towards US investors, citing virtual appearances at conferences in Las Vegas and an in-person interview on a Miami-based podcast. These actions further solidified the SEC’s argument for regulatory oversight in the case. Heart, on the other hand, argued in his dismissal motion that the SEC’s allegations infringed on his free speech rights, suggesting that the regulator’s use of his comments to support claims of securities offerings could suppress protected speech within the blockchain community.
The SEC’s vigorous opposition to Richard Heart’s attempts to dismiss the securities fraud lawsuit highlights the gravity of the allegations against him. The case underscores the importance of regulatory oversight in the cryptocurrency space and serves as a cautionary tale for those who engage in fraudulent practices within the industry.
Leave a Reply