SEC sued Richard Heart in New York because he used a Uniswap fork

A new lawsuit alleging crypto securities violations raises questions about developers’ liability. 

The US Securities and Exchange Commission on Monday sued crypto influencer Richard Schueler, known online as Richard Heart, and three of his projects for allegedly violating securities law. 

The suit was filed in the Eastern District of New York, because, the SEC said in its complaint, “many of the crypto asset transactions described herein took place on Uniswap, a so-called decentralized crypto asset trading platform whose developers are headquartered in Brooklyn.” 

The SEC alleged Schueler “raised more than $1 billion in the unregistered offer and sale of crypto asset securities” through Hex, PulseChain and PulseX, all of which are securities, the SEC said. 

Akash Mahendra, director at Haven1 Foundation and portfolio manager at Yield App, noted that the SEC’s allegations and rationale that has been used to justify the filing of this complaint in the eastern district of New York could set a dangerous precedent. 

In the blockchain world, many projects open source their code base. This means that anyone can copy code, creating an entirely new tool, software or product from it. These are known as forks. 

PulseX is a fork of Uniswap that runs on the PulseChain. 

“Forks, in most cases, run independently of their originating code; therefore, using the originator to justify where legal action should take place is somewhat nonsensical,” Mahendra said. 

Although Uniswap does not have anything to do with the projects under SEC scrutiny, the move to file suit in New York’s eastern district does not come as a surprise to Mahendra, who said the district court has been quite stringent on cryptocurrency matters.

“The SEC likely needs a victory after the very public initial loss of their Ripple case,” Mahendra said. “All in all, the agency is strategizing in its favor but lacks the logic to do so in a favorable light.”

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