As a seasoned crypto investor with a keen eye for regulatory battles, I find myself closely following the ongoing saga between Richard Heart and the SEC. Having navigated the volatile world of digital assets for over a decade, I’ve seen my fair share of legal tussles.
The U.S. Securities and Exchange Commission (SEC) has taken a stance against Richard Heart, the creator of Hex, in his effort to dismiss the legal action brought against him.
The Securities and Exchange Commission’s recent action stemmed from a motion presented by Heart’s legal representatives. In this motion, they stated that the SEC has no authority over this specific case, and moreover, asserted that no securities transactions took place.
SEC Opposes Motion to Dismiss Lawsuit Against Hex Founder
In a court filing with the U.S. District Court for the Eastern District of New York, the financial regulatory body contended that Heart’s request to dismiss the case should be refused. They emphasized that they hold the authority to proceed with this legal matter.
2023 saw the commission charging Heart with amassing $1 billion by selling unregistered securities. These funds, it was claimed, were then utilized to buy extravagant items such as Ferraris, Gucci merchandise, and a black diamond valued at $4.3 million. The allegation also includes the use of approximately $8.9 million from PulseChain investors’ funds to support his lavish lifestyle.
According to the SEC’s statement, Hex offers a staking system where investors can stake their tokens to earn approximately 38% more tokens as rewards. The SEC, however, suspects that a significant portion of the demand for Hex might be artificial. It’s estimated that between 94% and 97% of the Ethereum deposited into relevant wallets was returned to cryptocurrency exchanges.
This allegation was countered by Heart’s 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 investors’ money. They said:
It was clear to him that the wealth he’d accumulated – the watches, cars, and the big black diamond – wasn’t earned through the genuine profits of his businesses, but rather, it came from investments made by others.
In support of their client, Heart’s legal team asserted that Hex, PulseChain, and Pulse X are autonomous blockchain technologies, distinct from investment contracts that would be categorized as securities. To illustrate this point, they drew an analogy between Hex and Bitcoin, which the SEC has declared not to be a security. Heart’s legal team further argued that token holders were merely required to possess them within their digital wallet on the Ethereum network and utilize the software’s functionalities. They emphasized that no additional actions were mandated by the token holders.
“Hex, unlike Bitcoin, was constructed to surpass it in performance. However, similarly to Bitcoin, which the SEC acknowledges does not qualify as a security, Hex is not accused of having any additional functionalities beyond those embedded within its programming.”
Although Heart’s legal team argues that Hex isn’t classified as a security, financial regulations persist in viewing Hex, PulseChain, and Pulse X as investment products, sold with the intention of earning profits. Consequently, they are considered securities under U.S. law.
Furthermore, the agency disputed the attorney’s assertion that Heart resides overseas and is not accused of any U.S.-related crimes. They contended that Heart cannot evade the court’s authority by living abroad, as he has been physically and digitally present in the U.S., actively promoting to American investors.
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2024-08-23 14:00