In a high-stakes legal battle, the U.S. Securities and Exchange Commission (SEC) has staunchly opposed HEX (HEX) founder Richard Heart’s attempt to dismiss its monumental $1 billion securities fraud lawsuit. Filed in a New York federal court on August 22, but dated July 8, the SEC’s rebuttal underscores its authority and commitment to bringing the case to trial.
Heart, whose real name is Richard Schueler, had previously argued that the SEC had no jurisdiction over him due to his residence abroad and lack of direct U.S. involvement. In his motion to dismiss, filed August 22 and shared with the SEC in April, Heart contended that the SEC’s claims were baseless, as he did not directly engage with the U.S. market or its entities during the relevant period.
The SEC, however, contends that Heart’s assertions are misleading. The regulator points to evidence suggesting Heart actively targeted U.S. investors through various promotional efforts. Notably, Heart appeared virtually at a Las Vegas conference twice in 2022, and participated in a Miami-based podcast where he promoted HEX, PulseChain (PLS), and PulseX (PSLX)—all of which the SEC alleges are unregistered securities. According to the SEC, these activities, coupled with the involvement of U.S.-based developers, solidify its jurisdiction over the case.
Adding fuel to the fire, the SEC’s filing revisits its central accusation from the lawsuit initially filed in July 2023. It alleges that Heart misappropriated millions of dollars from PulseChain investors for personal luxuries, including high-end watches, luxury cars, and even the so-called “largest black diamond in the world.” Despite raising over $350 million for PulseChain’s development, the SEC claims Heart diverted over $12 million towards personal expenditures.
Heart’s dismissal bid also challenges the SEC’s allegations of deceptive conduct. He argues that the SEC failed to demonstrate any false or misleading statements on his part and contends that the regulatory body has not sufficiently proven that HEX, PLS, and PLSX qualify as investment contracts under federal securities laws. Moreover, Heart has criticized the SEC for infringing on his free speech rights, claiming that the case threatens to suppress blockchain commentary and computer code.
The SEC dismissed Heart’s free speech argument as a “novel and untenable position,” likening it to a bank robbery suspect arguing that quoting their demand undermines their constitutional rights. The SEC’s response underscores its commitment to pursuing the case and holding Heart accountable for the alleged violations.
The legal showdown is set to continue with the next hearing scheduled for October 24, 2024. As this high-profile case unfolds, it remains to be seen how the court will navigate the complex intersection of blockchain technology, securities regulation, and personal liberties.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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