US court has dismissed the SEC’s lawsuit against the creator of the PulseChain network and the HEX token

What’s new? A federal court in New York has dismissed the Securities and Exchange Commission’s (SEC) lawsuit against HEX token creator Richard Heart (also known as Richard Schuler), filed in 2023. Among other things, the regulator accused the entrepreneur of illegally using investor funds to buy a black diamond called Enigma weighing 555,55 carats.

Material by Bloomberg

What else is known? The lawsuit said Heart raised over $1 billion by selling unregistered securities, including HEX and other digital assets linked to his blockchain network PulseChain (PLS) and decentralized trading platform PulseX (PLSX).

Allegedly, the entrepreneur misled investors and spent at least $12,1 million to purchase luxury goods for personal use, including gems, watches, and luxury cars.

The SEC explained that the trading volume of HEX, PLS, and PLSX was artificially inflated to create a false impression of high demand, while most of the coins were controlled by Heart and his associates.

Separately, the regulator noted that the HEX token was advertised as an investment. In several broadcasts for 2019, Heart claimed that the asset would outperform BTC, ETH, and other cryptocurrencies and has already seen 115x growth.

Also in 2020, the HEX staking program was launched, which the SEC said contributed to investors’ expectation of profits from the project developers’ activities — one of the attributes of a security under US law under the Howey Test.

SEC: Meme tokens do not fall under the definition of a security

The statement implies that market participants will not need to register with the commission

Read more

For her part, Judge Carol Amon said at the February 28 hearing that the SEC “failed to plead sufficient facts” that would allow it to attribute its activities to the United States.

Thus, the SEC claimed, that Heart discussed the benefits of the PulseChain token on his website and YouTube, but the regulator “fails to allege that this conduct was directed at the United States.”

The judge added, however, that she would allow the SEC to address the identified deficiencies of the lawsuit and amend it.

As for Heart, he is a US citizen but currently resides in Finland.

“PulseChain, PulseX and HEX are not securities and should be allowed to flourish. Thank you President Trump for supporting cryptocurrency,” Heart’s spokesperson told Bloomberg.