Coinspeaker SEC Battles Hex Founder Richard Heart in Legal Dispute, Opposes His Attempt for Lawsuit Dismissal
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 Heartâs 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 Heartâs 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 investorsâ 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 Heartâs 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 investorsâ money. They said:
âHeart knew that he had not purchased his watches, cars, and large black diamond with actual profits from his enterprises, but with funds from investors.â
Further defending their client, Heartâs 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. Heartâs 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 softwareâs features. They stated:
âHex was built as a superior alternative to Bitcoin designed to âoutperformâ it, like Bitcoin â which the SEC has conceded is not a security â Hex is not alleged to have any actual or intended functionalities other than the mechanics built into its software code.â
Despite Heartâs legal team explaining that Hex isnât 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 Heartâs lawyerâs 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 courtâs jurisdiction by living abroad, as he has been physically and virtually present in the US and actively marketed to American investors.
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SEC Battles Hex Founder Richard Heart in Legal Dispute, Opposes His Attempt for Lawsuit Dismissal