A federal judge dismissed on Friday a lawsuit by U.S. securities regulators accusing an online entrepreneur of raising more than $1 billion through unregistered
cryptocurrency offerings and defrauding investors out of $12.1 million to buy luxuries including the world's largest black diamond.
U.S. District Judge Carol Bagley Amon in Brooklyn cited a lack of ties between Richard Heart's alleged conduct and the United States in
deciding to toss, opens new tab the U.S. Securities and Exchange Commission's
2023 lawsuit against Heart, a U.S. citizen residing in
Finland.
The SEC had alleged that Heart, also known as Richard Schueler, touted his Hex token, PulseX asset trading platform and PulseChain asset network on YouTube and other websites as pathways to "grandiose wealth."
The SEC in its lawsuit said Heart knew his often "tongue-in-cheek" disclaimers that his offerings were not securities were false, including when he said that Hex was capable of 38% annual returns and "built to be the highest appreciating asset that has ever existed in the history of man."
He was also accused of spending PulseChain investor funds on McLaren and Ferrari sports cars, four Rolex watches costing $3.02 million, and "The Enigma," a 555-carat black diamond costing 3.16 million British pounds (then $4.28 million) at a Sotheby's auction in February 2022, the SEC said.
But Amon said the online statements at issue were directed to a global audience, not a U.S. one specifically, and that the SEC failed to allege he engaged in transactions with U.S.-based investors through his websites.
To the extent the complaint alleged Heart misappropriated investor funds through deceptive transactions, those actions occurred entirely abroad, the judge wrote.
"The alleged misappropriation occurred through digital wallets and
crypto asset platforms, none of which were alleged to have any connection with the United States," Amon wrote.
A spokesperson for Heart said in a statement the judge's ruling "in favor of a cryptocurrency founder and his projects over the SEC brings welcome relief and opportunity to all cryptocurrencies."
The SEC did not respond to a request for comment.