A federal judge dismissed a lawsuit the US Securities and Exchange Commission (SEC) filed, alleging crypto entrepreneur Richard Heart used misappropriated investor funds to purchase a 555-carat black diamond.
The suit, which the SEC first filed in August 2023, accused Heart — who was born Richard Schueler and who created the Hex cryptocurrency token — of committing fraud by raising more than $1 billion through unregistered cryptocurrency offerings and spending $12.1 million on luxury assets, including cars, watches and diamonds. One of those luxury purchases was that of the Engima, a 555-carat black diamond believed to have originated in outer space, which Heart purchased from Sotheby’s in February 2022 for GBP 3.2 million ($4.3 million).
However, Brooklyn judge Carol Bagley Amon threw out the SEC’s case, stating it failed to prove Heart’s actions took place in the US. Heart is a US citizen living in Finland.
“To satisfy the conduct and effects test, the SEC must show ‘conduct within the United States that constitutes significant steps in furtherance of the violation,’ or ‘conduct occurring outside the United States that has a foreseeable substantial effect within the United States,’” she wrote. “Here, the SEC fails to allege sufficient facts that place Heart’s conduct within the United States…. As such, I cannot reasonably infer that Heart’s conduct was ‘conduct within the United States.’”
Image: The 555-carat Enigma diamond. (Sotheby’s)
