(Reuters) – A federal judge on Friday dismissed 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 the U.S. Securities and Exchange Commission’s 2023 lawsuit against Heart, a U.S. citizen residing in Finland.
Representatives for the SEC and for Heart did not immediately respond to requests for comment.
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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.
(Reporting by Nate Raymond in Boston; Editing by Leslie Adler)
