SEC Charges Hex Founder for Selling Unregistered Securities
- The SEC accused Heart of exploiting investors and using the funds to purchase luxuries.
- Coinbase CEO Brian Armstrong said the commission wanted it to delist over 250 cryptocurrencies except Bitcoin.
- The SEC filed a lawsuit against Binance and Coinbase in June for allegedly selling unregistered securities.
The US Securities and Exchange Commission (SEC) has charged entrepreneur Richard Heart with fraudulently soliciting more than $1 billion through three unregistered cryptocurrency offerings and cheating investors into paying $12.1 million to purchase luxuries such as diamonds.
The US regulator filed a complaint on Monday where it accused Heart of raising over $1 billion from “the unregistered offer and sale of crypto asset securities,” such as Hex, PulseChain (PLS), and PulseX (PSLX). Heart, according to the SEC, claimed these tokens were “a pathway to grandiose wealth for investors.”
The SEC’s filing noted that:
Heart began marketing Hex in 2018, claiming it was the first high-yield ‘blockchain certificate of deposit,’ and began promoting Hex tokens as an investment designed to make people ‘rich.
The SEC accused Heart of breaking federal securities laws and defrauding both foreign and local investors. Heart was said to have promised these investors impressive returns in exchange for deposits, which the regulator said ran into millions of dollars.
The SEC added that Heart hired developers to maintain the framework behind the crypto assets. It said,
Heart and PulseChain defrauded investors by misappropriating at least $12.1 million of PulseChain investor funds. Instead of using these investor funds to develop and market the PulseChain network or even to fulfill Heart’s explicit statement that invested funds supported ‘freedom of speech, Heart and PulseChain used at least $12.1 million of investor funds for Heart’s luxury purchases, including a 555-carat diamond, expensive watches, and high-end automobiles.
The US regulator noted that both PLS and PLSX are “practically worthless,” adding that “Hex’s value has dropped about 98.4% below its all-time high.” The SEC is currently seeking a jury trial and, among other things, wants to completely ban Heart and his enterprises from selling securities backed by crypto assets.
Additionally, the agency wants to secure prejudgment interest, reclaim illegally obtained gains, and impose civil penalties. Heart, who resides in Finland, was issued a civil summons, which requires him to respond within 21 days.
SEC Urged Coinbase to Delist all Cryptocurrencies Except Bitcoin
The news of the SEC’s filing against Heart comes hours after the commission was said to have ordered Coinbase to delist all cryptocurrencies except Bitcoin. Coinbase CEO Brian Armstrong told the Financial Times that the SEC wanted it to delist over 250 tokens from its platform before it filed a suit against Coinbase.
The SEC at the time said it believed “every asset other than Bitcoin is a security.” Interestingly, Coinbase’s CEO believes that agreeing to the SEC’s demands would have “essentially meant the end of the crypto industry” in the U.S.
However, an SEC spokesperson explained that
SEC staff does not ask companies to delist crypto assets. In the course of an investigation, the staff may share its view as to what conduct may raise questions for the Commission under the securities laws.
The SEC filed lawsuits against Coinbase and Binance in June, claiming both crypto exchanges offered unregistered securities.
Lawrence has covered some exciting stories in his career as a journalist, he finds blockchain-related stories very intriguing. He believes Web3 will change the world and wants everyone to be a part of it.
