Hex founder Richard Heart’s bid to dismiss SEC fraud lawsuit fails

The US Securities and Exchange Commission has challenged Hex founder Richard Heart’s attempt to dismiss his billion-dollar securities fraud lawsuit, asserting jurisdiction over the case.

In its opposition brief, filed in federal court in New York on Aug. 22 but dated July 8, the SEC asserted that Heart’s motion to dismiss does not address the well-supported allegations in the complains and ignores the relevant legal standards.

Heart had previously argued in its motion to dismiss that the regulator lacks authority because it resided abroad and had no presence in the US during the relevant period.

SEC Alleges Misuse of Funds and Challenges Heart’s Defense

According to the official SEC filing, from December 2019 to November 2020, Heart marketed Hex as a crypto asset security, branding it as a “blockchain depository receipt” with the promise of steadily increase token holdings through participation.

Heart’s claims, which included promises of high returns and the claim that Hex was the “most appreciated asset ever,” attracted significant investment.

In fact, investors were said to have poured $678 million into ETH, and the SEC noted that despite these big promises, the value of Hex plummeted roughly 98.4% from its all-time high in July 2023.

Other allegations involve Heart’s spin-off companies, PulseChain and PulseX. The regulator accused Heart of raising more than $354 million for PulseChain by soliciting “sacrifices” of crypto assets, which were later used for personal luxuries, including high-end watches, cars and what he says it is the largest black diamond in the world, rather. that the development of the platform.

To conceal these transactions, Heart allegedly moved approximately $217 million through a series of transfers and a crypto mixer, ultimately misappropriating $12.1 million for luxury purchases.

Additionally, the SEC mentioned that PulseChain and PulseX did not launch as promised until May 2023, well after their fundraising periods ended.

The free speech argument of the heart rejected by the SEC

The agency also stressed that the founder’s marketing efforts were broadly aimed at US investors, noting virtual appearances at conferences in Las Vegas and an in-person interview on a Miami-based podcast, which essentially emphasized yet plus the relevance of the case to US regulatory oversight.

Heart’s motion to dismiss also argued that the SEC’s case violates his free speech rights, arguing that the regulator’s use of his comment to allege securities offerings could suppress protected speech on the blockchain. The SEC, however, rejected this argument as “unsustainable.”

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