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

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As a seasoned analyst with over two decades of experience in financial markets and regulatory compliance, I find myself closely following the ongoing legal battle between Richard Heart and the U.S. Securities and Exchange Commission (SEC). Given my background, I can’t help but see parallels between this case and other high-profile securities fraud cases I’ve encountered throughout my career.

In response to Richard Heart’s attempt to dismiss the lawsuit brought against him by the U.S. Securities and Exchange Commission (SEC), the SEC has chosen not to comply. This action follows a motion filed by Heart’s legal team, which argued that the regulatory body does not have authority in this case because no securities were traded.

U.S. SEC Challenges Motion to Dismiss

As an analyst, I’m reporting that in a recent filing, I’ve seen the U.S. Securities and Exchange Commission (SEC) petition the U.S. District Court for the Eastern District of New York to deny Richard Schueler, who operates under the alias Heart, his motion to dismiss a case against him. The charges against him involve allegedly swindling investors out of over $1 billion through the unregistered sale of securities on Hex, PulseChain, and Pulse X.

The U.S. Securities and Exchange Commission alleges that Heart misused approximately $8.9 million in investor funds from PulseChain, spending it on extravagant purchases like Ferraris, Gucci products, and a costly black diamond called the Enigma, which he bought for $4.3 million.

#PulseChain News:

Richard Heart case @RichardHeartWin MEMORANDUM OF LAW IN SUPPORT OF DEFENDANT RICHARD HEART’s MOTION TO DISMISS

— PulseXTokens.com (@PulsexTokens) August 22, 2024

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

Jurisdictional and Fraud Dispute

In a different phrasing, Heart’s legal team contends that he lives abroad and hasn’t engaged in activities against the United States, which brings up the question of whether the SEC has jurisdiction over him. However, the SEC countered by asserting that Heart was indeed present, both physically and digitally, within the U.S. and had also marketed to American investors.

Yet, the U.S. Securities and Exchange Commission emphasized that Heart’s actions fall under American jurisdiction, as residing abroad does not exempt him from complying with U.S. laws.

Currently, it’s worth noting that the U.S. Ninth Circuit Court of Appeals has partially overturned the earlier dismissal of a class-action lawsuit filed against Binance US. This lawsuit accuses Binance US of artificially influencing the value of HEX cryptocurrency.

Defense’s Argument and Rebuttal

Richard Heart’s legal team argues that Hex, PulseChain, and Pulse X are autonomous blockchain technologies, not investments subject to being classified as securities. They draw parallels between Hex and Bitcoin, which has been acknowledged by regulatory bodies as not a security, emphasizing that Hex is simply a piece of code with pre-defined functions.

According to Heart’s argument, token holders of Hex tokens merely needed to utilize specific software functionalities without taking additional steps. However, the U.S. Securities and Exchange Commission (SEC) maintains that Heart offered and sold Hex, PulseChain, and Pulse X as investment contracts, thereby classifying them as securities under American law.

Additionally, cryptocurrency expert Ben Armstrong (BitBoy) supported the legitimacy of HEX in a video released in January, arguing that it’s not a fraudulent venture. Armstrong pointed out that despite the ongoing legal troubles faced by HEX’s creator, the platform’s staking system has consistently paid its users, which has been a point of contention.

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2024-08-23 02:56