Is HEX a Scam or Just Something that Looks Really, Really Like a Scam?
“Oh, it looks like a scam, I know that,” says Richard Heart, the founder of the controversial new cryptocurrency HEX. Speaking to Tone Vays’ Bitcoin Law Review podcast, he admits that, “if you don’t look into it, it looks like every other scam.” (Updated on December 14: exchanges, where HEX is available, have been added)
As described on its website, HEX claims that it’s “designed to increase in value faster than anything else in history,” and that users can earn interest of up to 369%, depending on the amount of HEX they stake.
Does this sound too good to be true? Well, for many crypto experts and commentators it does. Numerous experts either affirm that HEX looks suspicious or that it most definitely is a scam, although some point out that it isn’t exactly a Ponzi scam, despite appearances.
How is HEX supposed to work
Here’s a brief outline of how HEX is supposed to work, according to its own website. Individual investors can obtain HEX by doing either one of three things: 1) proving they own a certain amount of Bitcoin (BTC) by signing a transaction with their private key; 2) exchanging Ethereum (ETH) for HEX; or 3) referring a friend.
Once users have HEX, they are then encouraged to ‘stake’ the token (i.e. keep it locked in a smart contract). This earns them interest (paid in HEX), which varies depending on how long they keep their HEX staked and how much of the overall supply of HEX is staked by all users.
“HEX pays stakers inflation,” founder Richard Heart explains to Cryptonews.com. “After day 353 HEX has at most 3.69% inflation, and it’s delayed as it’s only paid at the end of a stake, and stakes can be up to 5,555 days long.”
The HEX website mentions that keeping a proportion of HEX staked will increase the value of unstaked HEX. The thing is, there’s no underlying logic, mechanism or force by which unstaked HEX acquires value in the first place.
Specifically, HEX is not listed on any major or known exchange, and Heart admitted in his interview with Tone Vays that he’s not in talks with any exchange to list HEX. (However, it can be found on Bidesk and Saturn Network).
What industry experts say about HEX
“In my opinion, everything I’ve read about HEX makes me extremely suspicious and wary,” Andreas M. Antonopoulos – author, open blockchain educator – tells Cryptonews.com.
“I personally wouldn’t touch it. There are enough red flags there to equip a Chinese military parade.”
Other experts are similarly suspicious. Crypto analyst Alex Krüger refers to HEX as a “useless ERC20 token.”
“Its only purpose is to hopefully go up in value by attracting new suckers,” he tells Cryptonews.com. “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.”
Krüger doesn’t go so far as explicitly labelling HEX as a ‘scam,’ but others aren’t so shy.
Tone Vays spent hours speaking with Richard Heart on his Bitcoin Law podcast, and he tells Cryptonews.com that he has little doubt as to what HEX is.
“It’s an affinity scam,” he says. “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.”
Here, the “benefit” to Heart comes from the Ethereum users as they are transferring ETH to an address (presumably controlled by Heart) in order to obtain HEX. As of writing, this address has ETH worth around USD 5.3 million in it, none of which will be returned to users if they want to un-stake their HEX, since they’ll receive only HEX.
“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,” Tone Vays explains. “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.”
Richard Heart also denies that HEX is a Ponzi, but he also (unsurprisingly) goes further and argues that it’s not a scam, largely because what it’s doing is out in the open.
“HEX is software that users run, thus the only person that owes the user money is the user themselves,” he says.
“Since the HEX software mints the HEX the user owes himself, it can always pay its debt. It’s not a pyramid, as there is only 1 level of referral. Scams require deception. HEX is fully audited open to view and verify software that you run.”
How might HEX end?
Assuming that HEX is a scam, how will it play out? Tone Vays suspects it won’t be around for long.
“I expect this coin to be worthless within a few years and Richard either convincing the community that it was people like Tone Vays that ruined the greatest currency in history,” he says, “or he will cash out and disappear. Either way, anyone holding HEX for the long term (and maybe even the short term) will just lose their investment.”
Richard Heart denies that HEX is a scam. Although he doesn’t confirm that he’s profiting from HEX, telling Cryptonews.com that “It’s a mystery” when asked whether he’s making money out of the project.