TLDR:
SEC opposes Richard Heart’s motion to dismiss $1B securities lawsuit
Heart accused of raising over $1B through unregistered offerings of HEX, PulseChain, and PulseX
SEC claims Heart used investor funds for luxury purchases
Heart argues SEC lacks jurisdiction as he lives abroad
Case involves debate over whether HEX, PulseChain, and PulseX are securities
The Securities and Exchange Commission (SEC) has strongly opposed Hex founder Richard Heart’s bid to dismiss a $1 billion lawsuit filed against him in 2023.
The case centers around allegations that Heart, whose real name is Richard Schueler, raised over $1 billion through unregistered securities offerings of his crypto projects Hex, PulseChain, and PulseX.
In July 2023, the SEC filed a lawsuit against Heart, claiming he had inappropriately used investor funds to support a lavish lifestyle.
The regulator alleged that Heart spent millions on luxury items, including designer brands, high-end cars, and a rare black diamond valued at over $4 million.
https://t.co/mLZsmWIz4A #ROLEX Daytona rainbow and Submariner SABR. #HEXflexhttps://t.co/tyQE8i8y5h airdrop to all of #Ethereum soon! #HEXican #HEXflex
That rainbow Daytona alone is $1,000,000 after my diamond bracelet arrives. pic.twitter.com/BQ7dxHSE77
— Richard Heart (@RichardHeartWin) March 9, 2022
Heart’s legal team filed a motion to dismiss the case, arguing that the SEC lacks jurisdiction over him because he resides outside the United States.
They also contended that Heart made no explicit promises to investors and that his projects were decentralized, similar to Bitcoin.
The SEC, however, has pushed back against these arguments. In a filing dated July 8, 2024, but made public on August 22, the regulator asserted that it does have the authority to pursue the case.
The SEC pointed to Heart’s participation in various in-person and virtual events in the U.S., as well as his marketing efforts targeting U.S. investors, as evidence of his connection to the country.
One of the key points of contention is the nature of the Hex token’s staking mechanism. The SEC highlighted that Heart promoted potential returns of up to 38% for staking the HEX token. The regulator emphasized that investors had poured over $354 million into PulseChain alone.
The SEC’s lawyers argued that Heart “cannot avoid the Court’s jurisdiction by simply relying on the fact that he lives abroad.” They cited his in-person appearance at a Miami-based podcast and virtual appearances at Las Vegas conferences as evidence of his engagement with the U.S. market.
In response to Heart’s claim that he made no promises to investors, the SEC countered that he defrauded PulseChain investors by using funds for personal luxury purchases.
The regulator stated, “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.”
The case also involves a debate over whether Hex, PulseChain, and PulseX should be classified as securities. Heart’s lawyers argue that these are “decentralized blockchain technologies” similar to Bitcoin, which the SEC has previously stated is not a security. T
he SEC, however, maintains that Heart sold these tokens as investment contracts, thus qualifying them as securities.
The impact of this legal battle is already evident in the market. According to data from CoinMarketCap, both Pulsechain (PLS) and HEX have seen significant drops in value since their all-time highs. PLS is down 88.5% from its peak in May 2023, while HEX has fallen by over 84% from its highest point.
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