Brooklyn-based U.S. District Judge Carol Bagley Amon has dismissed the SEC's lawsuit against Hex, PulseChain, and Pulsex founder Richard Heart, born Richard Schueler, arguing the regulatory agency did not sufficiently establish its jurisdiction over Heart, a U.S. citizen based in Finland.
Amon's ruling argued the SEC failed to present specific evidence tying Heart to activities within the United States. "For example, the SEC alleges that Heart discussed the benefits of PulseChain, its profit potential, and his development efforts on PulseChain’s website and YouTube," the ruling states. "Notably, the [SEC's] Complaint fails to allege that this conduct was directed at the United States; instead, it merely alleges this conduct originated abroad through online activities."
The SEC's lawyers argued that Heart's appearances at U.S.-based conferences, such as the Hex conference in Las Vegas in September 2022, shows an intent to market towards U.S. investors. "Why else would he be appearing before these markets? Why would he be appearing before these audiences and talking about Hex, PulseChain, and PulseX if he did not understand that there was a market for his securities there," SEC lawyer Ben Kuruvilla argued in a hearing on October 31, 2024.
However, Amon ruled that statements made after the "offer period" of the assets didn't have any bearing on the case. "Although Heart did discuss Hex extensively during the Hex Conference, it is irrelevant to the offer and sale of unregistered securities because investors could no longer participate in the offer period," the ruling states. "The Complaint alleges that since the 'Hex Offering closed, Hex investors can only purchase Hex tokens from third parties' on platforms such as Uniswap...But Heart is not alleged to have any control or involvement in Uniswap."
The ruling didn't decide the question of whether or not Heart offered unregistered securities, or committed the fraud alleged in the original complaint, but rather found that the SEC didn't sufficiently establish firm connections between Heart and U.S. investors or developers.
"The Complaint alleges that some investors in the U.S. deposited crypto assets during the PulseChain Offer Period...This fails to show that the alleged fraud had a 'substantial effect in the United States,'" the ruling states.
However, Amon did leave an opening for the SEC to file an amended complaint addressing the question of jurisdiction, giving the agency 20 days to do so. The SEC did not immediately respond to a request for comment.
"Today's decision in favor of a cryptocurrency founder and his projects over the SEC brings welcome relief and opportunity to all cryptocurrencies," Heart said in an X post celebrating the ruling. "Thank you President Trump for supporting cryptocurrency."
The price of HEX has risen over 34% in the past twenty-four hours, according to CoinMarketCap.
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