TLDR

A federal judge has thrown out the Securities and Exchange Commission's lawsuit against cryptocurrency entrepreneur Richard Heart

A federal judge has tossed out the Securities and Exchange Commission’s lawsuit against cryptocurrency entrepreneur Richard Heart, ruling that the agency failed to establish jurisdiction over the Finland-based U.S. citizen and his crypto projects.

The decision marks a rare defeat for the SEC in its ongoing efforts to regulate the cryptocurrency industry.

District Judge Carol Bagley Amon issued the ruling on Friday, finding that the SEC did not demonstrate that Heart had enough contacts with the United States related to his cryptocurrency projects Hex, PulseChain, and PulseX. The court determined that Heart’s online activities were global in nature and not aimed at U.S. investors.

“The relevant online communications described in the Complaint during the offer periods consist of untargeted, globally available information,” Judge Amon wrote in her decision. She rejected the SEC’s argument that Heart’s virtual appearances at U.S. conferences established jurisdiction.

The SEC had alleged that Heart conducted unregistered crypto offerings that raised over $1 billion through Hex, PulseChain, and PulseX. The agency claimed he used deceptive “recycling” transactions to create a false impression of trading volume and organic demand for Hex tokens.

According to the 2023 complaint, Heart also allegedly misappropriated “at least $12.1 million of PulseChain investor funds” for personal luxury purchases. These purchases included a 555-carat black diamond known as “The Enigma” costing nearly $4 million, expensive watches, and high-end automobiles including McLaren and Ferrari sports cars.

No Connection to the United States

Despite these serious allegations, Judge Amon found that the alleged misappropriation occurred through digital wallets and crypto asset platforms with no established connection to the United States. “To the extent the Complaint shows that Heart misappropriated investor funds through deceptive mixer transactions, those actions occurred entirely outside of the United States,” she stated.

The court did not rule on whether Heart and his companies executed sales or offerings of securities under the SEC’s purview. It only determined that they exceeded U.S. authority based on jurisdictional grounds.

Heart, whose real name is Richard Schueler, acknowledged the rarity of winning a securities-related court case against the SEC. “HEX has operated flawlessly for over 5 years. Today’s decision in favor of a cryptocurrency founder and his projects against the SEC brings welcome relief and opportunity to all cryptocurrencies,” Heart posted on X following the verdict.

The tokens at the center of the case – PulseChain (PLS), PulseX (PLSX) and HEX (HEX) – have reportedly increased in value by approximately 36%, 67%, and 78% respectively since the ruling was announced.

Judge Amon has given the SEC 20 days to file an amended complaint to address the jurisdictional deficiencies identified in her ruling. This means the agency has until March 20 to refile their case with stronger evidence of U.S. connections.

While this represents a legal victory for Heart in his battle with the SEC, he faces other legal troubles. Finnish authorities remanded Heart into custody in September 2024 following allegations of tax fraud and assault, though they have reportedly been unable to locate him.

Interpol Notice

In December 2024, Interpol issued a red notice for Heart based on these same allegations. A red notice serves as a request to law enforcement worldwide to locate and provisionally arrest a person pending extradition or similar legal action, though it is not an international arrest warrant.

Finnish police did manage to seize around $2.6 million worth of luxury watches believed to belong to Heart. According to Finland’s national broadcaster Yleisradio Oy, law enforcement seized 20 luxury watches, most of which were Rolexes, from a residence in Espoo.

The watches were reportedly valued at a total of $2.68 million and were left behind when Heart vacated the property. Finnish authorities continue to search for Heart in connection with the tax fraud and assault allegations.

Despite authorities being unable to locate him physically, Heart remains active on social media platforms. He continues to promote his cryptocurrencies on X (formerly Twitter) and regularly uploads videos to his YouTube channel.

The case highlights the ongoing challenges regulatory agencies face in establishing jurisdiction over cryptocurrency operators who conduct business globally through digital means. The SEC’s ability to effectively regulate cryptocurrency offerings remains in question when the operators base themselves outside the United States.

The ruling may have broader implications for how U.S. regulatory agencies approach enforcement actions against international cryptocurrency entrepreneurs. It suggests that merely having a global online presence accessible to U.S. investors may not be sufficient to establish U.S. jurisdiction.