The US Securities and Exchange Commission has pushed back against Hex founder Richard Heart’s efforts to have the $1 billion securities fraud lawsuit against him dismissed. The SEC argued, in a brief filed in a New York federal court, that Heart’s motion to dismiss does not adequately address the allegations in the complaint and disregards relevant legal standards.
According to the SEC, Richard Heart marketed Hex as a crypto asset security, promoting it as a “blockchain certificate of deposit” that would yield consistent increases in token holdings through staking. Investors were drawn in by promises of high returns, with Heart going as far as labeling Hex as the “highest appreciating asset ever.” As a result, a substantial amount of $678 million worth of ETH was invested in Hex. However, despite the enticing claims made by Heart, Hex’s value plummeted by around 98.4% from its peak in July 2023.
The SEC’s allegations also touch on Richard Heart’s subsequent projects, PulseChain and PulseX. Heart is accused of raising over $354 million for PulseChain by urging individuals to “sacrifice” crypto assets, which were then allegedly used for personal expenses such as luxury watches, cars, and what he proclaims to be the largest black diamond in the world. Instead of channeling funds towards platform development, Heart purportedly engaged in dubious transactions amounting to $12.1 million for personal indulgences.
Furthermore, the SEC pointed out delays in the launch of PulseChain and PulseX, noting that they did not debut as advertised until May 2023, well after the conclusion of fundraising activities. The regulator emphasized that Richard Heart’s promotional activities were specifically aimed at US investors, citing virtual appearances at conferences in Las Vegas and an in-person interview on a Miami-based podcast. These actions, according to the SEC, highlight the case’s significance in terms of US regulatory oversight.
In his motion to dismiss, Richard Heart contended that the SEC’s lawsuit violates his right to free speech. He asserted that the regulator’s use of his statements to allege securities offerings could potentially stifle protected speech within the blockchain realm. However, the SEC maintains that the focus of the case lies in the fraudulent actions and misrepresentations made by Heart in connection with Hex, PulseChain, and PulseX, rather than impinging on free speech rights.
