So interestingly I was on a livestream with Richard Heart in summer 2017 when he teased HEX – back when people thought of him as a straightforward Bitcoiner – and I thought to myself “oh, that’s a shame, RH is launching an altcoin, I think he’s smart so it’s silly he would do that”. Well what I should have done was buy HEX instead of dismissing it, lol.

That said I’ve never owned HEX or dedicated a lot of thought to it – I outsourced all my understanding to Eric Wall who has always summarized the latest goings-on to me.

On to your question. I read the SEC complaint and I’m somewhat familiar. HEX is very much unlike Ripple, because Ripple has/had:

• A seasoned team of executives with tons of experience
• A huge legal budget and a massive headstart from selling billions of USD worth of XRP for about a decade
• A ton of credibility from all the partnerships they had struck with various financial institutions
• a meaningful “product” with real traction (even if I think it’s a stupid one)
• motivated backers and VCs who will go to bat for the firm. these are entities that have a ton in the idea of Ripple and won’t roll over without a fight. so they are highly motivated
• a decade of operational history and a bunch of momentum that goes with that- and a lot of serious stakeholders

Not to sound harsh, but HEX doesn’t have that. HEX is really just… Richard Heart. And he only has so much bandwidth and resources. And while I think XRP really was a security, there’s enough wiggle room in the case to see how the SEC might run out of steam and give up. But I do think the case will actually be fatal to Ripple in the end, just a pyrrhic victory for the SEC, since it will have been so insanely costly and such a huge drag on their resources and time. And they lost a bunch of intermediate court decisions along the way, which reduced their political capital.

By contrast, the SEC’s case against HEX/Pulsechain is a slam dunk, I’m sorry to say. I read the complaint and it clearly satisfies all the prongs of Howey. Additionally, RH marketed HEX to ordinary folks (Ripple did too, but RH was more working-class focused), and the price action is dismal, so the SEC is going to very easily be able to take the moral high ground and claim a huge number of ordinary folks were injured by RH.

While the SEC’s case is not criminal, when you see cases like this, it normally entails a parallel prosecution from the DOJ / law enforcement. This is such an open and shut case, and RH /HEX had such a US presence, that you will very likely see this. Even without a criminal case, the SEC is looking for disgorgement and fines, which means RH will have to cough up everything he made from HEX/Pulsechain and then more for fines. So he wont have capital left over to continue the project

On the matter of service. The SEC invested a lot of resources in the case, so they won’t give up easily, even if RH can dodge service for a time. Speaking from personal experience, a judge will let you extend service indefinitely if you ask them, and it’s clear the individual is dodging. What will actually happen is the SEC (or the DoJ, when the time comes), will hire investigators to find out where RH is and make sure is ultimately served. He may head to a non-extradition country, but the SEC case won’t just go away, so I think it will be fatal for the project (since no real exchange will deal with HEX in this state, no one will work for the company, etc).

I think HEXicans are emotionally invested in this (not the first time I’ve seen this in crypto, obviously I have been outspoken about Bitcoiners not being able to see any negatives with Bitcoin either), and so they refuse to admit that the bad news is really bad news. But it really is in this case. These kind of fraud cases are layups for law enforcement, and I don’t see any real ambiguity here. If the SEC was willing to destroy LBRY (a pretty solid, functional product that delivered a real service), you can bet they will show no mercy to HEX.

If litigation does develop, that will tie up all of RHs time and resources, and he won’t have any time to promote the protocol or develop the product. Based on founders who I know who have dealt with this, I can say this for sure. You can operate relatively unencumbered normally, but when you are dealing with discovery, and litigation, and the threat of massive penalties and fines, let alone possible criminal outcomes, you won’t have any ability to run the business as you ordinarily might. From my perspective, it looks like it’s curtains for HEX.

The most probably outcome, by far, in my estimate, is actually jail time for RH (after perhaps, an extended amount of time on the run/living in a non-extradition country). I give that a 70% chance. I don’t say this to be cruel or harsh, this is just my honest assessment. The 2nd most likely outcome, is a huge settlement which terminates HEX and Pulsechain, and causes the project to be wound down. I give that a 25% chance (keep in mind the first outcome is also fatal for HEX). By far the most unlikely outcome is that nothing happens, and the SEC forgets about their case. I would give that about a 5% chance.