Decrypt: SEC Responds to Richard Heart’s Attempt to Dismiss $1 Billion Hex Case

The United States Securities and Exchange Commission (SEC) has hit back at Richard Heart, the founder of the cryptocurrency project Hex, following his motion to dismiss a case alleging that he raised more than $1 billion by selling unregistered securities.

Last summer, Heart and three “unincorporated entities” that he controls were charged with “misappropriating millions of dollars of investor funds” raised from unregistered crypto asset security offerings, which generated more than $1 billion. This included using $12 million to buy luxury goods including “watches, cars, and the so-called largest black diamond in the world.”

The Hex founder’s legal team filed a motion to dismiss the lawsuit earlier this month, stating that Heart lives outside of the U.S. and did not sell products to American citizens. Today, the SEC made it clear that it disagrees.

“Heart argues that he can evade the Court’s exercise of personal jurisdiction because he lives abroad and claims he did not direct any activity at the United States,” the SEC filing explains, “The record, however, reflects Heart’s purposeful availment of the United States by creating a market for the offer, sale, and purchase of the Heart Securities here.”

Hex was a cryptocurrency that began marketing efforts in 2018, an earlier SEC complaint stated. The project was designed to reward those who acquired tokens early on, those who stake for longer, and those who refer other investors. This structure led to allegations that it was little more than a pyramid scheme. 

Despite Heart claiming that the project was never directed to American customers, a U.S. edition of The Economist ran an advertising campaign for the project that claimed the token rose in value by 11,500% in 129 days.

“Heart engaged in a targeted marketing campaign that was directed at U.S. investors,” the recent SEC filing said.

“Heart also failed to take any steps to ensure that the offerings he promoted would not be sold to U.S. investors,” the SEC lawyers added, “To the contrary, Heart made extensive ‘offers’ of the Heart Securities to U.S. investors—including through promotional and marketing statements.”

In an immediate response from Heart’s legal team, they explain that the SEC’s response to his request for dismissal is just the latest episode in its “ongoing haphazard campaign to punish people who create or interact with blockchain technologies.” 

“Next up, oral arguments, Oct. 24th,” Heart posted on Twitter. “Code is speech. Blockchains are speech. Speech is a protected human right. Freedom of movement and assembly are also protected human rights.”

Edited by Stacy Elliott and Andrew Hayward