The SEC has dropped its fraud case against Richard Heart, the founder of crypto projects HEX, PulseChain, and PulseX, marking only the second full dismissal by a federal judge since the regulatory body initiated enforcement actions against cryptocurrency projects.
SEC Drops Fraud Case Against HEX Founder Richard Heart
The U.S. Securities and Exchange Commission (SEC) has formally dropped its fraud case against Richard Schueler, better known as Richard Heart, founder of the crypto projects HEX, PulseChain, and PulseX.
Richard Heart is a well-known figure in the blockchain and cryptocurrency space.
Born Richard Yang, he is a programmer and entrepreneur who has developed several successful projects.
He is best known for creating the popular cryptocurrency project, HEX (Hexadecimal), which aims to provide a stable store of value and utility token.
Heart's work in blockchain and cryptocurrency has garnered significant attention, with many praising his innovative approach to solving real-world problems.
Background of the Case
The SEC had originally filed suit in July 2023, accusing Heart of raising over $1 billion through unregistered securities offerings. The regulator claimed that Heart’s activities were a clear target at U.S. investors, which is required for the enforcement action to proceed under federal law. However, a federal judge had previously dismissed the SEC’s initial complaint due to a lack of jurisdiction.
Dismissal and Its Implications
On April 21, the SEC informed the Eastern District Court of New York that it would not amend its complaint by the deadline, effectively bringing the case to a close. This marks only crypto case tossed in full by a federal judge since the regulatory body initiated enforcement actions against cryptocurrency projects.
Crypto regulations have undergone significant changes since the rise of cryptocurrencies.
Initially, most countries had a hands-off approach, but as their popularity grew, governments began to take notice.
In 2013, the US Treasury's Financial Crimes Enforcement Network (FinCEN) issued guidelines for virtual currency transactions.
Since then, many countries have established regulatory frameworks, including Japan, South Korea, and Singapore.
These regulations aim to combat money laundering, terrorist financing, and tax evasion while also promoting innovation in the crypto space.
David Kirk, partner at Kirk & Ingram LLP, who represented Heart in the case, stated that ‘That brings the case to an end with a complete victory for Mr. Heart.‘ He noted that this is the only SEC enforcement action against a participant in the cryptocurrency industry that was dismissed in its entirety by a federal judge.
Reaction from Richard Heart
Heart expressed his gratitude on X, stating that the SEC’s actions would have set a terrible precedent and caused significant damage to the open-source software and free speech industries. He also highlighted the importance of protecting these vital industries, which power most of the internet and facilitate online speech.
Open source software offers numerous benefits, including cost savings, customization flexibility, and community-driven development.
Users can access the source code, modify it, and distribute it freely.
This collaborative approach leads to faster bug fixes, improved security, and enhanced functionality.
Additionally, open source software often fosters innovation, as developers work together to create new features and solutions.
‘He [the SEC] actually sued software code itself in this case, claiming it could be an alter ego of a person, ‘ Heart said. ‘This would have set a terrible precedent and caused perhaps multiple billions of dollars of damage to the vital open source and free software industry that powers most of the Internet and your speech on it.‘
