SEC's Case Against Richard Heart Dismissed

SEC Case Against Richard Heart Dismissed

The US District Court for the Eastern District of New York dismissed the Securities and Exchange Commission's (SEC) lawsuit against Richard Schueler (Richard Heart), founder of Hex, PulseChain, and PulseX. The dismissal hinges on a lack of personal jurisdiction.

Key Takeaways

• The court found insufficient evidence of personal jurisdiction over Richard Heart within the US.
• The SEC failed to demonstrate that Heart's crypto transactions were domestic under US securities law.
• The court rejected the SEC's claims of fraud, citing the lack of evidence of substantial US involvement.

In July 2023, the SEC filed a complaint alleging that Heart sold unregistered securities and misappropriated investor funds. Heart countered with a motion to dismiss, arguing that the SEC overreached and failed to prove securities violations. The February 28th court order granted this motion.

The court's decision emphasized that Heart's marketing and sales activities, while global, weren't specifically targeted at US residents. Post-offer marketing (conferences and social media) was deemed irrelevant, as it didn't involve the sale of new securities. The court also found Heart's websites and online promotions lacked the interactivity to establish jurisdiction.

Furthermore, the SEC's fraud allegations related to PulseChain were dismissed due to the alleged fraudulent activity occurring outside the US. The SEC could not demonstrate that these transactions transpired within the US or had a significant impact on the country.

“I appreciate Judge Amon’s careful ruling which has dismissed all of the SEC’s claims against me. This type of victory over the SEC is quite rare. PulseChain, PulseX and HEX are not securities and should be allowed to flourish. HEX has operated flawlessly for over 5 years,” said Heart.

This ruling has significant implications for the cryptocurrency industry, highlighting the challenges the SEC faces in asserting jurisdiction over globally-operating crypto projects. The decision emphasizes the importance of clearly defining the geographical scope of marketing and sales activities for crypto projects seeking to avoid SEC scrutiny.

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