The US SEC has denied HEX’s founder Richard Heart’s attempts to dismiss the case filed against him and said that they have the jurisdiction to pursue its lawsuit.
SEC marred Heart’s efforts to dismiss the lawsuit against him in a filing made to the U.S. District Court for the Eastern District of New York which only became public on Thursday.
SEC’s filings read, “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 next hearing is scheduled for Oct. 24.
The SEC sued HEX and PulseChain founder Richard Heart(aka Richard Schueler), in 2023. Heart was accused of raising over $1 billion in unregistered securities offerings and using the sum to buy luxury cars, designer clothes and a rare black diamond, ‘The Enigma’ valued over $4 million.
In the filing, the SEC said that HEX’s staking mechanism allows investors to contribute HEX tokens that are locked up to get more HEX tokens at a later date.
Heart said that investors could receive a return of 38% for staking their HEX tokens, but SEC maintained that much of the demand for HEX was ‘artificial’, with “94%-97% of the ETH deposited” into that wallet “recycled through the so-called crypto asset trading platform.”
Heart’s legal team tried to dismiss the SEC’s lawsuit, arguing that no fraud was committed because he didn’t promise investors anything.
Advertisement
“The SEC’s fraud claims fail because the Complaint alleges no deceptive conduct,” they said. “The SEC asserts that ‘investors invested more than $354 million of crypto assets in PulseChain’ and that Mr. Heart allegedly used about $8.9 million of PulseChain assets to fund purchases of luxury goods. But the Complaint is remarkably silent as to what Mr. Heart stated would be done with the assets, owing to the fact that he promised nothing.”
SEC’s latest filing, however, argues that Heart committed fraud with PulseChain investors by using funds for his own “personal luxury purposes.”
“Heart knew that he had not purchased his watches, cars, and large black diamond with actual profits from his enterprises, but with funds from investors,” the SEC’s lawyers argued back.
Heart’s legal team asserted that Heart lives abroad and is not alleged to have engaged in any conduct directed at the US.
The SEC said that Heart “cannot avoid the Court’s jurisdiction by simply relying on the fact that he lives abroad.”
Heart’s lawyers argued that HEX, PulseChain and Pulse X are neither investment contracts nor securities. These companies are “decentralized blockchain technologies,” the lawyers said.
Advertisement
Describing HEX as a superior alternative to Bitcoin, built to outperform it, the lawyers said, “Like Bitcoin — which the SEC has conceded is not a security — Hex is not alleged to have any actual or intended functionalities other than the mechanics built into its software code.”
SEC responded that Heart sold HEX, Pulse and Pulse X as investment contracts and so came under securities.
