Challenging the SEC Lawsuit Against Hex Founder
The US Securities and Exchange Commission has responded to Hex founder Richard Heart’s attempt to dismiss the $1 billion securities fraud lawsuit, asserting its jurisdiction over the case.
In its opposition brief, filed in a New York federal court on August 22 but dated July 8, the SEC argued that Heart’s motion to dismiss fails to address the allegations in the complaint and ignores relevant legal standards.
Heart had previously claimed the regulator lacked authority because he resided abroad and had no presence in the US during the relevant period.
SEC Allegations and Heart’s Defense Challenges
As per the official SEC document, from December 2019 to November 2020, Heart promoted Hex as a crypto asset security, calling it a “blockchain certificate of deposit” with the promise of increasing token holdings through staking.
- Heart’s claims attracted significant investments with promises of high returns.
- Investors poured in $678 million worth of ETH, but Hex’s value dropped by 98.4% from its peak.
The SEC alleged that Heart raised over $354 million for PulseChain, using funds for personal luxuries instead of platform development.
- Heart allegedly misappropriated $12.1 million for luxury purchases.
- PulseChain and PulseX did not launch as promised until May 2023.
Dismissal of Free Speech Argument
The SEC highlighted that Heart’s marketing efforts targeted US investors, with appearances at conferences in Las Vegas and an interview on a Miami podcast, emphasizing the case’s relevance to US regulatory oversight.
Heart argued that the SEC’s case violated his free speech rights by using his commentary to allege securities offerings, potentially suppressing protected speech on the blockchain. The SEC rejected this argument.
Conclusion
As the SEC continues to pursue the securities fraud lawsuit against Hex founder Richard Heart, it remains crucial for investors to stay informed about regulatory challenges and potential risks associated with crypto investments.
While the outcome of this case is pending, it serves as a reminder of the importance of due diligence and caution when navigating the cryptocurrency landscape.
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