HEX founder Richard Heart’s legal team says their client isn’t a fraudulent ‘crypto’ scammer; he’s a First Amendment martyr who promised Hexicans nothing and delivered on that promise.
On January 9, attorneys representing Heart and his HEX family of scam protocols informed U.S. District Judge Carol Bagley Amon of their client’s intention to file a motion to dismiss the civil fraud charges filed against him by the Securities and Exchange Commission (SEC) last July. Heart’s attorneys requested a pre-motion conference to firm up some details of how the suit will proceed.
The filing in the U.S. District Court for the Eastern District of New York is the first public move that Heart’s legal team has made since he was accused of offering unregistered securities via his HEX, PulseChain, and PulseX entities. Heart is also accused of misappropriating “at least $12 million” of the over $1 billion raised through his various utility-free blockchain projects/scams.
With Heart hiding out in Helsinki, the SEC struggled to serve Heart with a summons demanding his response to the charges. Heart’s evasiveness forced the court to delay its initial hearing on the charges from last November until January 30, 2024. It was only in mid-December that the SEC informed the court that it had successfully served the summons via Substitute Service.
Heart’s attorneys start by taking issue with this legal workaround that their client’s furtiveness made necessary, claiming that “dropping papers at a Finnish police station is not valid service” of a complaint. (And yet, it seems to have compelled Heart to finally lawyer up and acknowledge the complaint, so…)
The filing takes issue with Heart being “haled [sic] into court” in the U.S., where he hasn’t lived for “well over a decade.” (Back in the day when he was a mere email ‘spam king.’) Heart’s team also claim that none of his blockchain projects were based in or “expressly aimed” at U.S. residents and thus the SEC has failed to establish personal jurisdiction requirements.
The filing argues that the SEC’s claims against Heart are “impermissibly extraterritorial” due to Heart’s belief that none of the illegal transactions “are adequately alleged to have occurred in the United States.” The filing also takes issue with the SEC’s view that Heart’s function-free tokens are ‘investment contracts’ under the Howey test, saying the complaint “lacks a single allegation of any contract involving Mr. Heart—or anyone—let alone an investment contract.”
The filing claims the SEC failed to provide any evidence of fraud, saying Hexicans were “explicitly promised nothing” for investing their funds in Heart’s blockchain boondoggles. Despite Heart spending $12 million on personal bling, the SEC’s view that Hexicans had a “reasonable expectation” that PulseChain assets would be used to their benefit is apparently insufficient to prove Heart’s fraudulent intent.
Heart’s team then cites the ‘major questions’ doctrine, a suddenly popular legal theory in right-wing U.S. circles that says any authority not explicitly granted to agencies like the SEC is a matter for Congress, not the courts, to interpret/decide. So stop this prosecution immediately and let the idjits on Capitol Hill who can’t reach consensus on any substantive issue reach consensus on this issue. (Or just let Clarence Thomas decide everything.)
Finally, Heart is lauded as a First Amendment martyr. His freedom of speech and association are allegedly being unconstitutionally infringed upon by SEC chair Gary Gensler, who “seeks to punish Mr. Heart for discussing open-source, peer-to-peer communications software.”
Further to this point, “because blockchains require trading tokens for space in their public ledgers, treating blockchains and their tokens as securities—which are banned from common trade and use as currencies—amounts to a de facto ban on the world’s first and only public, immutable speech technology.”
Heart’s attorneys told the court they’d met with their SEC counterparts and agreed on a tentative court schedule. Heart’s team will have until April 8 (90 days after this current filing) to file their motion to dismiss, and the SEC will have until July 8 to file their response, with Heart’s reply due August 22.
Fight for your right to Hearty
The day the brief was filed, Heart tweeted that he was “fighting the SEC for your rights.” That may prove small consolation to the number of Hexicans who’d prefer to see him fighting to return the luxury goods he bought with their money and then distributing the proceeds to his victims.
Heart closed his tweet by claiming that he and his attorneys “pray to the courts to defend the constitution and your rights.” Presumably, Heart will soon be tweeting videos of himself clad in some garish stars-and-stripes tracksuit that will make him look like an uber-patriotic version of the Lard Lad Donuts mascot.
Still, news that Heart had enough purloined cash left to hire lawyers helped produce a more than 40% rise in the HEX token, taking it to its highest value since November. Then again, HEX is still down 98% from its all-time high, so Heart will have to figure out some other way to make this dead cat bounce back.
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