The US Securities and Exchange Commission has stood firm against the attempt of Hex founder Richard Heart to dismiss its $1 billion securities fraud lawsuit. The SEC, in its opposition brief filed in a New York federal court, rebutted Heart’s claims that the regulator lacked jurisdiction due to his foreign residency and absence in the US during the relevant period. The SEC argued that Heart’s motion failed to address the substantial allegations in the complaint and disregarded key legal standards.
According to the SEC document, Richard Heart marketed Hex as a crypto asset security from December 2019 to November 2020, portraying it as a “blockchain certificate of deposit” promising continuous growth in token holdings through staking. Despite claims of high returns and Hex being touted as the “highest appreciating asset ever,” investors reportedly poured in $678 million worth of ETH. However, Hex’s value purportedly plummeted by about 98.4% from its peak by July 2023.
The SEC also accused Heart of soliciting over $354 million for PulseChain by asking for “sacrifices” of crypto assets, which were allegedly used for personal indulgences such as luxury watches, cars, and extravagant purchases, including what he claimed to be the largest black diamond globally, rather than for platform development. To conceal these transactions, Heart purportedly transferred around $217 million through various channels and a crypto mixer, resulting in the misappropriation of $12.1 million for lavish expenses.
Moreover, the SEC highlighted that both PulseChain and PulseX did not launch as proclaimed until May 2023, long after the fundraising periods had concluded. The regulator underscored that Heart’s marketing efforts were extensively directed at US investors, citing appearances at conferences in Las Vegas and an in-person interview on a Miami-based podcast, strengthening the case for US regulatory oversight.
In his dismissal motion, Heart also contended that the SEC’s case violated his free speech rights. He argued that the regulator’s use of his statements to allege securities offerings could potentially stifle protected speech on the blockchain platform.