The SEC aggressively opposed Richard Heart’s attempt to dismiss a $1 billion fraud case, arguing that his widespread promotion of unregistered digital assets such as HEX, PulseChain and PulseX directly targeted US investors.
The regulator’s Aug. 22 filing emphasized that Heart’s actions fall squarely under U.S. jurisdiction and that the evidence supports claims of extensive securities fraud.
According to the SEC, Heart, also known as Richard Schueler, allegedly raised more than $1 billion from investors around the world by selling unregistered securities and then embezzling millions for personal luxuries, including cars and what he called the world’s largest black diamond.
The complaint accuses him of violating key provisions of the Securities Act and the Securities Exchange Act and outlines how his fraudulent activities directly affected U.S. investors.
Grounds for jurisdiction
The SEC’s opposition filing is in response to Heart’s request to dismiss the case based on insufficient jurisdiction and the alleged inadequacy of the SEC’s claims.
Heart’s defense argued that its operations, which are conducted primarily outside the U.S., do not fall within the scope of U.S. securities laws. They further argued that the SEC’s complaint did not establish that he engaged in conduct in the U.S. that had a substantial effect on U.S. investors, as required under the “conduct and effects” test.
Heart also alleged that the transactions in question were predominantly foreign, further challenging the court’s jurisdiction. Furthermore, he asserted that the SEC’s allegations were insufficient to establish a plausible claim for damages, especially regarding the fraud claims.
In its detailed memorandum, the SEC refuted these claims by asserting that Heart’s actions had significant and direct impacts on U.S. investors. The agency pointed to Heart’s extensive promotion of the crypto tokens in question, including his personal appearances at US events and his active engagement with US investors via online platforms and social media.
The SEC emphasized that many of these promotional efforts were specifically aimed at attracting U.S. investors, further establishing the grounds for jurisdiction.
Heart’s alleged fraudulent activities include the unregistered offering and sale of securities in violation of Sections 5(a) and 5(c) of the Securities Act of 1933. In addition, the SEC charges Heart with violating anti-fraud provisions under section 17(a) of Heart. the Securities Act and Section 10(b) of the Securities Exchange Act of 1934.
Misleading investors
The watchdog’s complaint details how Heart misled investors about the use of their funds, funneling millions into personal luxuries including expensive cars and the so-called largest black diamond in the world.
The SEC’s opposition document highlighted the significant efforts Heart has made to market these digital assets to US investors. It noted that Heart’s interactions with the American public were not incidental, but rather part of a calculated strategy to attract substantial investment from the country.
The SEC further argued that Heart’s U.S. connections, combined with the extent of his alleged fraud, provide a clear basis for the court’s jurisdiction over him.
For now, the SEC remains steadfast in its pursuit of legal action against Heart, signaling its commitment to holding accountable those who engage in deceptive practices in the increasingly complex world of digital assets.
