SEC Opposes Hex Founder Richard Heart’s Motion to Dismiss $1 Billion Securities Suit

The US Securities and Exchanges Commission has countered the founder of Ethereum-based cryptocurrency Hex (HEX), Richard Heart's move to dismiss its $ billion securities lawsuit.

Heart denies all SEC allegations, claiming the regulator cannot prosecute him since he lives abroad. However, the SEC insists it has the authority to sue him and that he directed most of his HEX coin promotional efforts to US investors.

The SEC Vs. Heart Securities Lawsuit

The SEC sued Richard Hearts on July 3, 2023, claiming he raised over $1 billion from illicit crypto securities sales to US investors.

The regulator also accused Heart and his associated companies, PulseChain and PulseX, of fraud. The commission claims Heart and his unincorporated entities misappropriated $12 million of proceeds from securities offerings to buy luxury goods.

According to the regulator's complaint, Heart started promoting Hex in 2018, touting it as the first high-yield blockchain certificate of deposit."

He also marketed HEX tokens as a get-rich investment scheme. According to the SEC, Heart raised 2.3 million ETH from unregistered Hex token sales between December 2019 and November 2020.

Between July 2021 and March 2022, the illegal securities offerings raised millions of dollars in cryptocurrency. The funds were intended to support PulseChain, a supposed cryptocurrency network, and PulseX, a digital assets trading platform through their native tokens PLS and PLSX.

However, Heart diverted the funds to fund a luxury lifestyle, purchasing The Enigma diamond, sports cars, and watches.

Also, instead of telling investors to invest their digital assets in exchange for PLSX and PLS tokens, he used the word sacrifice." The SEC alleged that this action aimed at evading securities laws.

Hence, the SEC's suit filed in a New York District court alleges that Heart and the associated entities, including PulseChain, PulseX, and Hex, violated Section 5 of the Securities Act of 1993.

SEC's Opposition to Case Dismissal

In his April 8 dismissal motion, Heart denied the alleged offenses and asked the court to cancel all charges against him.

Heart, whose real name is Richard Scheuler, asserted that the SEC does not have authority over him as he resides abroad. He also claimed he never entered the United States during the period mentioned in the SEC's claims.

The motion also stated that the regulator never accused Heart of engaging in any operation directed at the US. Also, the SEC didn't mention any US-based companies, contracts, employees, marketing efforts, or payment accounts associated with Heart.

Therefore, the defendants conclude the SEC's allegations are not plausible, arguing that securities laws generally do not apply extraterritorially.

Meanwhile, in its August 22 filing, the SEC rebutted Heart's defense, insisting he directed several promotional efforts toward US investors. Moreover, Heart appeared virtually to promote Hex, PLS, and PLSX during a Conference held in Las Vegas in March and September 2022.

In addition, the regulator claimed that in August 2022, Heart appeared in person for an interview on a Miami-based podcast. It also claimed a US-based developer contributed to creating Hex, PulseX, and PulseChain.

While Heart claims SEC's case infringes his right to freedom of speech, the watchdog says his position is untenable. In its rebuttal argument, the regulator likens Heart's assertions to a robber claiming his rights were violated in court.

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