During ANON Summit 2020, I participated in a “fireside chat” with Richard Heart, founder of HEX. HEX is one of the most sophisticated, if not THE most sophisticated scams I have ever seen.
Why was I so aggressive with Richard? I have a lot of experience fighting with scammers, at events, and in online discussions. I’m familiar with their bullshit techniques. Richard is the sort of “master debater” who will answer a question without actually answering the content of the question. I watched more than 6 hours of his previous talks and learned how to tell when he was trying to avoid a real answer.
If you don't want to sit through hours of interviews yourself, this 4 minute video not only sheds light on Heart's motivation for establishing HEX, but also shows just how abrasive and crude he can be. This video was not created or edited by Cointelligence.
I want to draw your attention to the quote in the video above: "What am I going to make more money doing? Promoting my token, that I own a whole ton of? Or promoting bitcoin, where I own one-one zillionth of the available supply?" He's clearly in this to make money for himself in any way possible.
The ANON Summit Interview
Here are some quick takeaways of the conversation at ANON Summit:
- Richard Heart was sued for spamming in 2002 under WA state law. Source: https://www.zdnet.com/article/peacefire-org-beats-spammers-in-court/
- The “Origin Address” currently receives between 45-50% of the HEX funds.
- Richard will not admit to knowing who is behind the Origin Address, and admits to dodging the question.
- Richard falsely claims that HEX is not a security.
Cointelligence is known for fighting scams. Since our formation in 2017, we’ve researched and called out ICO scams, scam exchanges, and individual scammers in the crypto industry. We have conducted dozens of workshops on due diligence, scam prevention, and scam fighting, and we have multiple guides on our site on how to identify scams. Personally, I’ve also made it a point to let event organizers and crypto publications know when they are promoting and enabling scams.
Before this fireside chat, the Cointelligence team did thorough research into HEX. We found numerous signs that the project was a scam with similarities to a Ponzi scheme model. It was obvious to us that it was a scam, but the fireside chat was intended to give Richard an opportunity to prove us wrong or correct any false information we had turned up in our investigation.
Richard’s answers in the video below only confirmed to us that HEX is a scam.
Fighting with scammers
During the interview at ANON, Richard confirmed that he was one of the first people in the world to be sued for online spam, back in 2002. This shows us Richard has experience abusing unregulated markets, as he is doing with crypto these days.
One of our biggest concerns with HEX is that the “Origin Address” receives copies of the bonuses awarded during the launch phase. I asked Richard about this at the 14:10 mark in the ANON video. He told me that origin gets a copy of the speed bonuses and referral bonuses awarded to users during this 353-day phase. It also gets half of the early and late phase end penalties. Richard claimed that the reason why this “Origin Address” currently has 49-50% of the supply is that not many people are currently free-claiming with a bitcoin address.
Richard went on to claim that “nobody knows” who is behind this “Origin Address”, trying to liken it to no one knowing who Satoshi is. He specifically told me that he doesn’t want ME to know. When I pressed the matter and asked for a simple “yes” or “no” as to whether he, as the FOUNDER of HEX, knows who benefits from the funds sent to the “Origin Address” he flat-out said “I’m dodging your question.” Dodging the question! He proceeds to repeat “Dodge, dodge.”
Later on, I asked Richard why the FAQ or homepage for HEX doesn’t disclose that 45% of the HEX funds go to the Origin Address. He replied that it was on the Disclaimer, but this is misleading. The only mention of the Origin Address in the disclaimer reads "ETH sent to the HEX contract or any HEX the origin address receives. You must have no expectation of profit from the efforts of others." We consulted the disclaimer on June 8, 2020. According to the Terms & Conditions section of that page, "This disclaimer was amended for the last time on December 2nd, 2019."
When asked why HEX was not categorized as a security, at around the 21 minute mark, Richard offered an explanation that has no legal grounding. On the website, HEX claims that it is "The first high interest blockchain certificate of deposit." However, HEX has no legal authority to issue CDs. Richard is illegally claiming to provide CDs when in fact the instruments are nothing but glorified savings accounts.
I asked Richard to give me his details so that I could approach the SEC to open an investigation into him and into HEX, and he refused. I even offered to make a $10,000 donation to a crypto startup in return for his cooperation, but he was not interested. And I provided my own information to him, should he wish to take legal action against me for defamation and libel. I did this because after investigating almost 100 scams, we have found a lot of common themes with scammers. One of those is that they are always resistant to disclosing any personal information.
Reaction from Richard Heart and HEX fans
In the wake of the interview, Richard Heart and the legions of HEX followers went on the attack, especially over Twitter. Most of their criticism was not focused on the content of the debate itself, but instead was focused on my personal appearance, character, and there were even racist comments.
Richard seems to take special pleasure in bad-mouthing people and acting like a bully. This sort of personality attracts a worshipful following who see this sort of behavior as “telling it like it is” or “having no filter” or “not being afraid.” For those who haven’t bought into the cult of personality, it just seems like childish posturing.
For the record, I have a visual impairment. I wear glasses; you’ve seen them in most photos and videos of me, I’m sure. But that didn’t stop Richard’s followers from joining in with their own comments about my appearance. I’m sharing this to demonstrate how rather than attacking the substance of my arguments, they focus on superficial details.
And this is an example of racism by HEX fanatics:
On the other hand, this is how a normal person responds, when they know what HEX is all about:
Now let's look at other actions taken by the HEX army - One of their followers updated my details on a wall of shame (people calling out HEX). That seems like a normal thing for a legitimate company to have, right?
It wasn’t too surprising to discover that Ran NeuNar, a well known scam enabler, joined HEX’s followers in criticizing me, while forgetting to mention he himself was called out by Cointelligence before:
A conversation with a HEX fan
I was surprised and disappointed to discover that someone I know, who is active in the crypto community and should know better, is also a supporter of Richard Heart and HEX! He agreed to talk to me about why he follows Heart, and how he feels about promoting HEX to other people.
The following screenshots will show us:
- How a scammer victim behaves and thinks. A scammer victim is a victim of a scam who becomes a scammer himself by promoting the scam.
- The fact this scam victim actually believes EVERYTHING Richard is saying without checking anything:
- He thinks Richard is a billionaire because Richard said it.
- He thinks there was a smart contract audit because Richard said it.
- He thinks there are actually legal opinions because Richard said it.
- He thinks Richard always speaks the truth.
- He thinks the fact that Richard is an OG means he speaks the truth.
- He thinks its OK for a few million USD worth of crypto to be withdrawn without knowing who received it, or what it's being used for, because Richard says it's OK.
- He feels sorry for promoting HEX but still is doing it.
Years of criticism of Richard Heart and HEX
I wasn't the first person to suggest that HEX was a scam, and I doubt I'll be the last. There's a history going back around three years of people within the cryptocurrency community raising concerns about Richard Heart and his project.
In 2017, Jonathan Sterling privately raised concerns with Richard about his identity ("Richard Heart" is a pseudonym, as he also admitted in our conversation during ANON) and his plans for the project. This led to evasion, insults, and veiled threats from Richard, all of which are documented on Sterling's blog.
More information on Richard Heart can be found in this review of HEX published by CryptoCastle (as of this writing, the article had most recently been updated in early May 2020 and did not believe HEX was a scam). Most tellingly, they point out that Heart was able to retire early by making his money spamming, selling whatever he could via email marketing -- including sex enhancement drugs, the hallmark of spam promotions.
Fast forward to January 22, 2019, and Crypto Insider published a lengthy article that focused primarily on flaws with the HEX project itself -- including the small team with relatively little experience, the questionable tokenomics, and Heart's flip-flopping opinion about Ethereum. This article also considered Heart's ability to manipulate the value of HEX due to his position as a crypto influencer. This article was later updated to include details about the Origin Address, discovered by Mark Rex. After the Crypto Insider site went down, this article was cross-posted to Steemit.
HEX continued to draw scrutiny after that. NewsBTC published an article by Tony Spilotro which shared concerns about HEX's claim that it was designed for 10,000x returns (a huge red flag!), and included in that article an interview that Naomi Brockwell conducted with former HEX developer Kieran Mesquita, who had left the project due to his discomfort with the project's business practices, as well as having issues with Heart. This article also expresses a belief that Richard holds almost half of the HEX, which they also consider a huge red flag for a scam.
On December 6, 2019, Goldman Sats published a thorough article on how HEX was designed to enrich Richard Heart. They argue that HEX is not an MLM, Ponzi scheme, or pyramid scheme, but rather a whole new breed of scam. This really builds on the earlier reporting on the Origin Address.
CoinRivet published an article on December 16, 2019, highlighting how Trevon James and Craig Grant, who had previously shilled for BitConnect, were now promoting HEX.
That same month, Bitcoin.com came under fire for being the first major exchange to list HEX. This article from Micky highlights the outcry over the decision, as well as recapping the concerns with HEX and Richard Heart. It also features Richard claiming that HEX just seems like a scam because he's using scam-like tactics to draw attention to his project and away from actual scams, and that he hired James and Grant so they would not shill "some other bullshit."
On December 27th, almost 800 ETH was liquidated from the HEX ICO wallet, leaving around 46,000 ETH still in the wallet. This prompted concerns that HEX was performing an exit scam, as highlighted in this article on Finance Magnates.
This was borne out when on January 26th, the Origin Address wallet was emptied out in a series of 36 transactions, for a total of around $7m worth of ETH at the time. CryptoSlate reported on this series of transactions the following day, expressing belief that this was proof of an exit scam.
However, this can hardly be called a true exit scam, as HEX is still operating it and Heart is still promoting it. On May 15, 2020, Cointelegraph reported that HEX had a market cap of $979m and a value of $0.006. True believers still defend the project on Twitter and other social platforms.
And why should Heart perform an exit scam on HEX when his true believers keep investing more funds? Watch this video to learn where the ETH goes when someone purchases HEX:
In June of 2020, the wallet was once again subject to a number of transactions that drained the funds. Heart, of course, claims that NO ONE KNOWS who is taking those coins, just like NO ONE KNOWS who holds the keys to the Origin Address:
Crypto community sentiment on HEX and Heart
Thought leaders within the crypto community have not been shy in sharing their opinions about HEX, alongside all of the reporting being done on the project.
In December of 2019, Both Andreas M. Antonopoulos and Tone Vays spoke out about Heart in an article published on Cryptonews.com - According to Antonopoulos: "In my opinion, everything I've read about HEX makes me extremely suspicious and wary. I personally wouldn't touch it. There are enough red flags there to equip a Chinese military parade."
Tone Vays had even more to say about the project, and what nature of scam it is. "It's an affinity scam. Here is how affinity scams work. A person like Richard Heart convinces a community and builds a reputation as a trustworthy and knowledgeable authority with a cult like following. Then finds the perfect time to sell that community something worthless to them for a lot of benefit to him. HEX promises crazy high interest and high returns but they are in the HEX currency which Richard Heart (or his smart contract) creates out of thin air. Therefore, it is not actually a Ponzi, it is advertised like a Ponzi but it's not. If it was, it would be a lot easier to recognize the scam for both investors and regulators."
Crypto analyst Alex Krüger refers to HEX as a "useless ERC20 token" in a short Twitter thread where he laid out his concerns about the project. Among other things, he said: "It is marketed as 'designed to do over 10,000x returns in under 2.5 years,' which reads great for attracting the uninformed and the greedy."
Stay away from HEX!
Ponzi schemes like HEX succeed because their founders and early adopters manage to convince people to trust them and ignore the little voice telling them that it’s too good to be true. But Richard Heart doesn’t seem very trustworthy. Push at him a little bit, and he gets uncomfortable. Ask pointed questions about the Origin Address and you won’t get any satisfactory answers. And that’s aside from the potential securities fraud. He claims to have an answer for everything, and to know the ins and outs of the crypto industry, but he refuses to answer any questions related to HEX’s potentially fraudulent activities. We can only assume that he’s trying to hide something, and whatever he’s hiding can’t be good.