The US Securities and Exchange Commission has pushed back against Hex founder Richard Heart’s attempt to have its $1 billion securities fraud lawsuit dismissed, asserting that it has jurisdiction over the case. In its opposition brief filed in a New York federal court, the SEC argued that Heart’s motion to dismiss failed to address the well-supported allegations in the complaint and disregarded relevant legal standards. Heart had previously claimed in his motion that the SEC lacked authority due to his residence abroad and lack of presence in the US.
Allegations Against Heart
According to the official SEC document, from December 2019 to November 2020, Heart promoted Hex as a crypto asset security, labeling it as a “blockchain certificate of deposit” with the promise of steadily increasing token holdings through staking. His claims of high returns and Hex being the “highest appreciating asset ever” attracted significant investment, with investors reportedly putting in $678 million worth of ETH. Despite these promises, Hex’s value allegedly dropped by around 98.4% from its peak as of July 2023.
The SEC also accused Heart of raising over $354 million for PulseChain by soliciting “sacrifices” of crypto assets, which he later used for personal luxuries instead of platform development. To conceal these transactions, Heart supposedly moved around $217 million through transfers and a crypto mixer, misappropriating $12.1 million for luxury purchases. Additionally, the launch of PulseChain and PulseX, which were promised long before, did not happen until May 2023 after the fundraising periods had ended.
The SEC highlighted that Heart’s marketing efforts were heavily aimed at US investors, citing virtual appearances at Las Vegas conferences and an in-person interview on a Miami-based podcast. These activities emphasized the relevance of the case to US regulatory oversight. Heart’s motion to dismiss also argued that the SEC’s case violated his free speech rights by potentially suppressing protected speech on the blockchain.
The SEC’s case against Hex founder Richard Heart is filled with serious allegations of securities fraud and misleading investors. The regulator has made it clear that it believes it has jurisdiction in this matter, highlighting the importance of regulatory oversight in the cryptocurrency space. Heart’s dismissal motion has been met with strong opposition from the SEC, and the case is likely to continue for some time as both sides present their arguments in court.