A federal judge in Brooklyn has dismissed the Securities and Exchange Commission's (SEC) lawsuit against cryptocurrency entrepreneur Richard Heart, dealing a blow to regulators' efforts to crack down on alleged crypto fraud.
Judge Carol Bagley Amon ruled that the SEC failed to establish sufficient connections between Heart's activities and the United States, despite him being a U.S. citizen. Heart, who currently resides in Finland, was accused of raising over $1 billion through unregistered cryptocurrency offerings.
The SEC's 2023 lawsuit alleged that Heart, also known as Richard Schueler, promoted his Hex token, PulseX trading platform, and PulseChain network as paths to extraordinary wealth through YouTube and other online channels. Regulators claimed he misled investors with false disclaimers about his offerings not being securities.
The complaint also accused Heart of misappropriating $12.1 million in investor funds to purchase luxury items, including sports cars, expensive watches, and a 555-carat black diamond known as "The Enigma" bought at a Sotheby's auction for £3.16 million.
However, Judge Amon determined that Heart's online promotional statements targeted a global audience rather than specifically U.S. investors. The court also found that the SEC did not adequately demonstrate Heart conducted transactions with U.S.-based investors through his websites.
The judge noted that any alleged misappropriation of funds occurred through digital wallets and crypto platforms with no proven connection to the United States. The ruling highlights the challenges regulators face in pursuing cases involving cryptocurrency operations that cross international borders.
Representatives for both the SEC and Heart have not yet commented on the dismissal of the case.