Nader Al-Naji, founder of BitClout, has been charged by the SEC with orchestrating a fraudulent cryptocurrency scheme involving the unregistered sale of BTCLT tokens.
Points
- Al-Naji allegedly misled investors about the use of funds.
- Over $7 million was spent on personal expenses.
- BitClout was portrayed as a decentralized entity to evade regulation.
- The SEC’s complaint includes violations of the Securities Act of 1933 and the Securities Exchange Act of 1934.
- Parallel charges have been filed by the US Attorney’s Office for the Southern District of New York.
The Securities and Exchange Commission （SEC） has charged Nader Al-Naji with orchestrating a multi-million-dollar cryptocurrency fraud scheme connected to the social media platform BitClout and its native token, BTCLT. Starting in November 2020, Al-Naji reportedly raised over $257 million through unregistered offers and sales of BTCLT.
According to the SEC, Al-Naji deceived investors by assuring them that the funds would not be used for personal gain. Contrary to these promises, he allegedly used more than $7 million for personal expenses, including rent for a luxurious Beverly Hills mansion and lavish gifts for family members.
In an effort to evade regulatory scrutiny, Al-Naji presented BitClout as a decentralized entity with no controlling company, using the pseudonym “Diamondhands” to conceal his involvement. The complaint also claims that he obtained a legal opinion from a prominent law firm based on misrepresented project details, suggesting that BTCLT tokens would not be considered securities under federal law. Simultaneously, Al-Naji allegedly informed select investors of his intention to bypass legal requirements.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, stated, “Al-Naji attempted to evade federal securities laws and defraud the investing public, mistakenly believing that being ‘fake’ decentralized would confuse regulators. As we have shown time and again, we are guided by economic realities, not cosmetic labels. The dedicated staff of the SEC uncovered Al-Naji’s lies and will now hold him accountable for misleading investors.”
The SEC’s complaint, filed in the US District Court for the Southern District of New York, accuses Al-Naji of violating the registration and anti-fraud provisions of the Securities Act of 1933 and the anti-fraud provisions of the Securities Exchange Act of 1934. Additionally, the SEC has named Al-Naji’s wife, mother, and entities under his control as relief defendants for receiving investor funds. In a parallel action, the US Attorney’s Office for the Southern District of New York has also announced charges against Al-Naji.
Explanation
- The SEC’s charges highlight the need for transparency and honesty in cryptocurrency ventures.
- Misleading investors about the use of funds and the nature of the project can lead to severe legal consequences.
- The portrayal of BitClout as a decentralized entity to evade regulation illustrates the challenges regulators face in overseeing the rapidly evolving crypto industry.
- The parallel charges from the US Attorney’s Office underscore the seriousness of the allegations and the coordinated effort to hold Al-Naji accountable.
- This case serves as a reminder for investors to conduct thorough due diligence before investing in cryptocurrency projects.