The US Securities and Exchange Commission has stood firm in its decision to challenge Hex founder Richard Heart’s efforts to dismiss the $1 billion securities fraud lawsuit filed against him. The SEC recently submitted an opposition brief in a New York federal court, highlighting the inadequacies of Heart’s motion to dismiss and emphasizing its jurisdiction over the case.
Heart had previously argued that the SEC lacked authority in the case due to his residency abroad and lack of presence in the US during the relevant period. However, the SEC refuted these claims, asserting that Heart’s motion to dismiss failed to address the substantive allegations in the complaint and disregarded pertinent legal standards.
Allegations Against Richard Heart
According to the SEC document, Richard Heart marketed Hex as a crypto asset security, promoting it as a “blockchain certificate of deposit” with the promise of continuously increasing token holdings through staking. His claims of high returns and the declaration that Hex was the “highest appreciating asset ever” attracted substantial investments, totaling $678 million worth of ETH. Despite these grand promises, Hex’s value reportedly plummeted by nearly 98.4% from its peak in July 2023.
The SEC also raised concerns about Heart’s subsequent projects, PulseChain and PulseX. It was alleged that Heart raised over $354 million for PulseChain by soliciting crypto asset “sacrifices” from investors, which were allegedly used for personal expenses such as luxury watches, cars, and extravagant jewelry. Additionally, the SEC pointed out that PulseChain and PulseX failed to launch as promised until May 2023, long after the fundraising campaigns had ended.
The SEC underscored that Heart’s marketing efforts were heavily geared towards US investors, citing virtual appearances at conferences in Las Vegas and an interview on a Miami-based podcast. These actions, along with the substantial investments from US individuals, further solidified the case’s relevance to US regulatory oversight.
Free Speech Rights Argument
Heart’s motion to dismiss also contended that the SEC’s case infringed on his free speech rights, suggesting that the regulator’s interpretation of his comments could stifle protected speech on the blockchain. This argument raises questions about the intersection of free speech and securities regulations in the evolving digital landscape.
The SEC’s unwavering stance in the legal battle against Richard Heart demonstrates its commitment to upholding investor protections and enforcing securities laws in the rapidly changing cryptocurrency market. The outcome of this case could have significant implications for the regulation of crypto assets and the accountability of individuals and entities involved in their promotion and sale.
Leave a Reply