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The United States Securities and Exchange Commission has opposed the Hex founder Richard Heart’s bid to dismiss its lawsuit against him.
The United States Securities and Exchange Commission (SEC) has opposed an attempt by Hex founder Richard Heart to drop the lawsuit filed against him.
This latest move from the SEC was a result of a motion filed by Heart’s legal team, in which they wrote that the financial watchdog lacks jurisdiction in the case and further argued that no securities were transacted.
SEC Opposes Motion to Dismiss Lawsuit Against Hex Founder
However, in the filing to the US District Court for the Eastern District of New York, the financial regulator argued that Heart’s motion to dismiss the case should be denied. They clarified that they have the jurisdiction to pursue the case.
The commission in 2023 accused Heart of raising $1 billion through the sale of unregistered securities and using the proceeds to purchase luxury items like Ferraris, Gucci merchandise, and a rare black diamond worth $4.3 million. They alleged that he used around $8.9 million of investors’ funds from PulseChain to sponsor his expensive lifestyle.
Explaining its stand, the SEC stated that Hex has a staking program that allows investors to stake their tokens to get a 38% reward in more tokens. However, the SEC believes much of the demand for Hex was likely fake. Around 94%-97% of the Ethereum put into related wallets was cycled back through cryptocurrency exchanges.
This allegation was countered by Heart’s lawyers. They noted in their defense that the Hex founder has not committed any fraud as he did not make any promises to the investors. However, the SEC, through its lawyers, said Heart is aware that his luxury lifestyle was sponsored by investors’ money. They said:
“Heart knew that he had not purchased his watches, cars, and large black diamond with actual profits from his enterprises, but with funds from investors.”
Further defending their client, Heart’s legal team argued that Hex, PulseChain, and Pulse X are decentralized blockchain technologies, not investment contracts that would be classified as securities. They compared Hex to Bitcoin, which the SEC has classified as not being a security. Heart’s lawyers also claim that token holders were not required to do anything other than hold them in their digital wallet on the Ethereum network and use the software’s features. They stated:
“Hex was built as a superior alternative to Bitcoin designed to ‘outperform’ it, like Bitcoin — which the SEC has conceded is not a security — Hex is not alleged to have any actual or intended functionalities other than the mechanics built into its software code.”
Despite Heart’s legal team explaining that Hex isn’t a security, the financial regulation maintains that Hex, PulseChain, and Pulse X were all sold as investment contracts, which therefore makes them securities under US law.
Moreover, the agency kicked against Heart’s lawyer’s claim that he lives abroad and was not alleged to have committed any offense directed to the United States. They argued that Heart cannot escape the court’s jurisdiction by living abroad, as he has been physically and virtually present in the US and actively marketed to American investors.
Disclaimer: Coinspeaker is committed to providing unbiased and transparent reporting. This article aims to deliver accurate and timely information but should not be taken as financial or investment advice. Since market conditions can change rapidly, we encourage you to verify information on your own and consult with a professional before making any decisions based on this content.
Temitope is a writer with more than four years of experience writing across various niches. He has a special interest in the fintech and blockchain spaces and enjoy writing articles in those areas. He holds bachelor's and master's degrees in linguistics. When not writing, he trades forex and plays video games.
