On Friday, a federal judge dismissed the Securities and Exchange Commission's lawsuit against crypto entrepreneur Richard Heart, ruling the agency failed to establish personal jurisdiction over the Finland-based U.S. citizen.
District Judge Carol Bagley Amon found the SEC didn't demonstrate Heart had sufficient contacts with the U.S. related to his crypto projects Hex, PulseChain, and PulseX.
The court rejected the SEC's argument that Heart's virtual appearances at U.S. conferences established jurisdiction, noting that his presence "focused on a different post-offering asset" and doing so was "insufficient to establish personal jurisdiction."
The court didn’t rule whether Heart and his companies executed sales or offerings of securities under the SEC’s purview, only that they exceeded U.S. authority.
"Here, unlike in PlexCorps, Heart's website contacts were not 'active,'” Judge Amon wrote. “The Complaint fails to allege that Heart facilitated transactions, collected credit card information, or entered into contracts with U.S.-based investors through his websites."
The SEC alleged Heart conducted unregistered crypto offerings, raising over $1 billion through Hex, PulseChain, and PulseX, used deceptive "recycling" transactions to gain more tokens, falsely marketed high staking returns, and tried to evade securities laws by framing investments as "sacrifices," according to a 2023 complaint.
Heart, through recycling, attempted to create the false impression of significant trading volume and organic demand for Hex tokens, the regulator alleged.
The SEC also claimed Heart misappropriated "at least $12.1 million of PulseChain investor funds for Heart's personal luxury purchases, including a 555-carat diamond, expensive watches, and high-end automobiles."
Despite those allegations, Judge Amon determined Heart's online activities weren't specifically directed at U.S. investors.
"The relevant online communications described in the Complaint during the offer periods consist of untargeted, globally available information," the ruling reads.
Judge Amon has granted the SEC 20 days to file an amended complaint addressing the jurisdictional deficiencies.
In December, Interpol issued its red notice for Heart, as a “request to law enforcement worldwide to locate and provisionally arrest a person pending extradition, surrender, or similar legal action.”
Still, it is just a request, with the organization explaining at the time “a red notice is not an international arrest warrant,” and it remains up to individual countries to decide whether to act on it.
Edited by Sebastian Sinclair