SEC Responds to Richard Heart’s Lawsuit Dismissal Motion

The U.S. Securities and Exchange Commission (SEC) has asserted its jurisdiction in the ongoing case against Richard Heart, founder of Hex and PulseChain, countering his attempts to dismiss the lawsuit.

On July 8, the SEC filed to the U.S. District Court for the Eastern District of New York, arguing that Heart’s motions should be denied. The filing became public on Thursday, highlighting that Heart overlooked the well-pleaded allegations of the complaint and the relevant laws.

In 2023, the SEC sued Richard Schueler, known as Richard Heart, for allegedly raising over $1 billion through unregistered securities offerings, using the proceeds for luxury items including expensive cars, designer clothing, and a rare black diamond known as The Enigma, valued at over $4 million.

The complaint indicated that Hex has a staking component, allowing investors to lock up Hex tokens to later receive more tokens, promising returns of 38%. However, the SEC claimed that much of the demand was artificially created, with 94%-97% of ETH deposited into a specific wallet being recycled through the crypto trading platform.

Heart’s legal team has contested these allegations, asserting that there was no fraud since he made no promises to investors. They argued that the SEC’s claims about Heart’s purported deceptive conduct were unfounded.

Yet the SEC countered these claims, stating Heart defrauded PulseChain investors by using their funds for personal luxuries. The SEC emphasized that Heart was aware that the purchases were funded by investor money, rather than profits from his ventures.

Heart’s lawyers additionally claimed that he lives abroad, arguing this exempted him from U.S. jurisdiction. The SEC challenged this, pointing to Heart’s in-person and virtual appearances aimed at U.S. investors.

The defense argued that Hex, PulseChain, and Pulse X are decentralized technologies, not securities or investment contracts. They asserted that Hex was created as a superior alternative to Bitcoin, with no intended functionalities beyond its code. Conversely, the SEC maintains that these assets were sold as investment contracts, categorizing them as securities.

The next hearing is set for October 24.