SEC Continues Legal Battle Against Hex Founder Richard Heart Over Alleged $1 Billion Fraudulent Securities Sale

The U.S. Securities and Exchange Commission (SEC) is standing firm against attempts by Hex founder Richard Heart to have a lawsuit against him dismissed. The legal battle has taken a significant turn as the SEC urges the U.S. District Court for the Eastern District of New York to refuse Heart’s plea for dismissal, deepening the scrutiny around the controversial figure and his cryptocurrency ventures.

At the heart of the dispute is the allegation from the SEC that Richard Heart, whose legal name is Richard Schueler, has engaged in deceptive practices, misguiding investors out of over $1 billion through the sale of unregistered securities linked to Hex, PulseChain, and Pulse X. The SEC’s case paints a picture of a scheme fueled by lavish spending, with Heart accused of diverting approximately $8.7 million of investor funds to acquire luxury items, such as Ferraris and rare collectibles including the Enigma black diamond, which he reportedly purchased for $4.2 million.

The SEC’s filings reveal a complex web of financial transactions, suggesting that Heart promoted Hex as a lucrative staking product, promising investors a return of 37.5% in additional tokens. This claim is under scrutiny, with the SEC highlighting concerns that a significant portion of the ethereum (eth) used in transactions related to Hex might have been manipulated to inflate the cryptocurrency’s trading volume falsely.

In defending himself against the SEC’s charges, Heart has argued that the regulatory body lacks jurisdiction over his actions, given his residence outside the United States and his claim that the transactions in question do not qualify as securities under U.S. law. However, the SEC counters this position by emphasizing Heart’s physical and virtual presence in the U.S. and his targeted marketing efforts towards American investors, thereby asserting jurisdiction over the case.

This legal confrontation comes amid a broader regulatory clampdown on the crypto industry, with the SEC taking an increasingly assertive stance against entities it perceives as violating securities laws. The case also arrives on the heels of a partial reversal by the United States Ninth Circuit Court of Appeals in a class-action lawsuit against Binance US, where it was alleged that the exchange manipulated the price of HEX cryptocurrency.

In his defense, Heart and his legal team have likened Hex, PulseChain, and Pulse X to decentralized blockchain technologies like bitcoin, which the SEC does not classify as a security. They argue that Hex operates solely as a software with specific functionalities, challenging the SEC’s assertion that the tokens were sold as investment contracts and thus fall under the jurisdiction of securities regulation.

The unfolding legal drama has attracted attention from various quarters, including prominent cryptocurrency influencer Ben Armstrong, also known as BitBoy. Armstrong has publicly defended Hex, highlighting its staking model and asserting that the platform has consistently rewarded its users, despite the ongoing legal challenges faced by its founder.

As the case progresses, it underscores the complex interplay between innovation in the rapidly evolving cryptocurrency space and the regulatory frameworks designed to protect investors. The outcome of this legal battle could set significant precedents for how similar cryptocurrency projects are viewed and regulated by authorities in the United States and potentially beyond. The SEC’s firm stance against Heart’s motion to dismiss the lawsuit is a clear signal of the regulatory body’s commitment to enforcing compliance within the cryptocurrency industry, signaling that neither geographical boundaries nor technological complexities will serve as barriers to regulatory oversight.