US SEC Counters Richard Heart’s Attempt to Dismiss Lawsuit Over Hex

US SEC opposes Richard Heart’s dismissal bid over allegations of $1 billion in unregistered securities via Hex, PulseChain, and fraud in misusing investor funds. The US SEC charged Richard Heart with raising $1 billion through Hex, PulseChain, and Pulse X—all unregistered securities. 

The US SEC opposes Richard Heart’s jurisdictional defense on grounds that he targeted US persons through his marketing. The SEC charged Heart with misusing $8.9 million from PulseChain for luxury purchases to rebut claims of non-fraudulent conduct.

The US Securities and Exchange Commission has opposed Hex founder Richard Heart’s motion to dismiss the lawsuit against him. It comes after a motion from Heart’s legal team suggesting that the regulatory agency lacks jurisdiction in the case and no securities were exchanged.

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U.S. SEC Opposes Motion to Dismiss

The US SEC filed a motion asking the US District Court for the Eastern District of New York to quash the motion to dismiss the case by Heart. Heart faces charges for defrauding investors of more than $1 billion by selling unregistered securities related to its crypto tokens Hex, PulseChain, and Pulse X.

The U.S. Securities and Exchange Commission charged Heart with siphoning nearly $8.9 million of investors’ money at PulseChain to spend on things like Ferraris, Gucci, and a rare black diamond known as the Enigma, which he purchased for $4.3 million.

Other allegations are that Heart was marketing Hex as a staking product where investors would have to put their tokens ‘to stake’ and, in return, get a reward of 38% more tokens. According to the agency, they likely considered most of the demand for Hex to be fraudulent, with 94%-97% of the Ethereum that users deposited in the related wallets being ploughed back into the crypto exchanges.

Jurisdictional and Fraud Dispute

Heart’s defense also argues that he resides in another country and has never taken any action targeted towards the United States thus raising an issue on the jurisdiction of  the SEC. However, the agency argued its case by claiming that Heart had been in the U.S. both physically as well as virtually besides advertising to the U.S. investors.

However, the US SEC had countered that Heart’s actions fall within the purview of the U.S. because he cannot “evade the reach of the U.S.” just because he is living elsewhere.

Separately, the United States Ninth Circuit Court of Appeals has reportedly – and also fairly recently – partly overturned the dismissal of a class-action lawsuit filed against Binance US. He alleges in the lawsuit that Binance US manipulated the price of HEX cryptocurrency.

Arguments of the Defense and Reply

Richard Heart’s attorneys assert that they consider Hex, PulseChain, and Pulse X decentralized blockchain technologies rather than investment contracts; therefore, they do not classify them as securities. They compare Hex with Bitcoin, which the regulatory body has agreed is not a security, and underpin the fact that Hex is just code with predefined functions.

According to the defense, token holders of Hex tokens did not have to do anything more than use certain features provided in the software. However, the U.S. SEC keeps on insisting that Heart sold Hex, PulseChain, and Pulse X as investment contracts, making them securities as per the laws of the United States.

Also, cryptocurrency influencer Ben Armstrong made a defense for HEX in a video in January, stating that the project was not a scam. Armstrong added that HEX’s staking model, which has long been controversial, has rewarded its users all along, even with the legal issues the founder of the platform is facing.