The United States Securities and Exchange Commission has pushed back on Hex (HEX) founder Richard Heart’s bid to toss its $1 billion securities suit, arguing it has the full authority to bring the case to Heart.
“In his Motion asking the Court to dismiss all the claims against him, Heart disregards the well-pleaded allegations of the Complaint and the applicable law,” the SEC said in its opposing argument, filed in a New York federal court on Aug. 22 but dated July 8.
In a dismissal motion filed on Aug. 22 that was shared with the SEC on April 8, Heart — real name Richard Schueler — claimed the regulator has no sway over him as he “lives abroad and is not alleged to have set foot in the United States during the relevant period.”
It added that the SEC didn’t allege Heart “engaged in any conduct” directed at the US and didn’t claim any US-based “entities, employees, contracts, payment accounts, marketing efforts, or travel associated with Mr. Heart.”
Heart’s dismissal bid claims it didn’t plausibly allege domestic securities transactions. Source: CourtListener
The SEC hit back, claiming he “directed many of his promotional efforts specifically toward investors in the United States” as Heart twice appeared virtually before a Las Vegas conference in March and September 2022 to promote HEX, PulseChain (PLS) and PulseX (PSLX) — which it claims are unregistered securities.
It also alleged Heart was interviewed in person on a Miami-based podcast in August 2022, where he promoted HEX and PLS. The SEC said at least one US-based developer helped make Hex, PulseChain and PulseX.
Cars, watches, and a big black diamond
The SEC’s latest rebuttal repeated one of its central allegations from when it sued Heart in July 2023.
It claimed he used millions of dollars of PulseChain investor funds to buy luxury items, including watches, cars and the “so-called largest black diamond in the world.”
Highlighted excerpt of the SEC’s rebuttal claiming he illegally raised over >
Highlighted excerpt of the SEC’s rebuttal claiming he illegally raised over $1 billion and spent millions on personal items. Source: CourtListener
billion and spent millions on personal items. Source: CourtListener
The regulator claimed Heart raised over $350 million from investors to develop the Ethereum fork and “often spoke about the efforts that he and his developers were making to bring PulseChain online” but alleged he spent over $12 million on personal luxury goods.
Heart’s dismissal bid claimed the SEC “alleges no deceptive conduct at all, nor any statement that was false or misleading.”
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The SEC again alleged Heart illegally sold securities through HEX, PLS and PLSX. Heart said the regulator didn’t plausibly allege they were investment contracts under federal securities laws.
Heart also claimed the SEC’s case was an infringement of his free speech rights, as it used his commentary to allege securities offerings. He claims it threatens to “stifle protected speech uttered on the blockchain, including the computer code underlying software programs that the SEC aims to shut down.”
“This is a novel and untenable position,” the SEC said to rebuff Heart’s argument, “akin to a bank robbery defendant claiming that his constitutional rights are violated if prosecutors quote him as saying ‘stick ‘em up.’”
The next hearing in the case is scheduled for Oct. 24.
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