SEC Finally Serves Hex Founder Richard Heart with Lawsuit Alleging Fraud
On November 12, 2020, the Securities and Exchange Commission (SEC) served Hex founder Richard Heart with a lawsuit alleging fraud. The SEC claims to have evidence to prove that Heart used fraud to solicit investors to purchase tokens associated with Hex (an Ethereum-based token).
The lawsuit claims that, from August 2019 to at least July 2020, Heart operated a fraudulent unregistered securities offering scheme which he called “HEX Capital Management.” According to the complaint, Richard claimed he could generate returns for investors through an algorithm that relies on manipulating the prices of Ethereum and other tokens in order to ensure a return on investment. The SEC alleges though that Heart had no trading algorithm and instead he used the funds to enrich himself and his associates with luxury cars and holidays.
The SEC seeks to prevent Heart from engaging in future violations and to obtain civil monetary penalties. The SEC is also asking for a return of all profits from the fraudulent scheme, as well as a penalty of $150,000.
The SEC’s move to serve Richard Heart with a lawsuit is another example of its enforcement push for fraudulent crypto related activities such as initial coin offerings (ICOs). The SEC has taken a hard stance against ICOs, unregistered securities offerings, and other types of fraud related to the cryptocurrency industry. As enforcement efforts continue, it will likely result in stricter regulation and more cases of fraud being prosecuted.