The US Securities and Exchange Commission has responded to Hex founder Richard Heart’s motion to dismiss its $1 billion securities fraud lawsuit by asserting its jurisdiction over the case. According to the SEC’s opposition brief filed in a New York federal court, Heart’s attempt to dismiss the lawsuit fails to address the well-supported allegations in the complaint and ignores relevant legal standards.
The official SEC document details how from December 2019 to November 2020, Heart promoted Hex as a crypto asset security, marketing it as a “blockchain certificate of deposit” with the promise of consistently increasing token holdings through staking. Investors were lured in by Heart’s claims of high returns and assertions that Hex was the “highest appreciating asset ever,” resulting in a significant investment of $678 million worth of ETH. Despite these promises, Hex’s value plummeted by approximately 98.4% from its all-time high as of July 2023.
In addition to the allegations against Hex, the SEC also accused Richard Heart of raising over $354 million for PulseChain by soliciting “sacrifices” of crypto assets, which were allegedly misappropriated for personal luxuries such as high-end watches, cars, and extravagant purchases, rather than the development of the platform. The SEC highlighted that around $217 million was moved through various transfers and a crypto mixer, with $12.1 million being used for luxury expenses.
The SEC emphasized that both PulseChain and PulseX did not launch as promised until May 2023, long after the fundraising periods had ended. Furthermore, the regulator pointed out that Richard Heart’s marketing efforts were extensively targeted at US investors, with virtual appearances at conferences in Las Vegas and an in-person interview on a Miami-based podcast, further solidifying the case’s relevance to US regulatory oversight.
Heart’s motion to dismiss the SEC’s case also argued that his free speech rights were being infringed upon, suggesting that the regulator’s use of his commentary to allege securities offerings could potentially suppress protected speech on the blockchain. Despite these claims, the SEC remains firm in its position and continues to pursue the securities fraud lawsuit against Richard Heart.