The SEC has charged BitClout founder Nader Al-Naji with $257 million fraud, alleging he misled investors and misappropriated funds.
Points
- Nader Al-Naji is charged with defrauding investors of $257 million through BitClout.
- Al-Naji falsely claimed BitClout was decentralized while controlling it under a pseudonym.
- The SEC alleges misuse of investor funds for personal expenses.
- Al-Naji’s wife, mother, and related entities are also named in the complaint.
- The charges include violating securities laws and wire fraud.
The Securities and Exchange Commission （SEC） has charged Nader Al-Naji with $257 million fraud in connection with BitClout and BTCLT tokens. The complaint revealed that Al-Naji had been telling investors lies all along. Al-N
SEC Sues BitClout Founder Al-Naji, Reveals He’s Been Feeding Investors with Lies
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The SEC has charged BitClout founder Nader Al-Naji with $257 million fraud, alleging he misled investors and misappropriated funds.
Points
- Nader Al-Naji is charged with defrauding investors of $257 million through BitClout.
- Al-Naji falsely claimed BitClout was decentralized while controlling it under a pseudonym.
- The SEC alleges misuse of investor funds for personal expenses.
- Al-Naji’s wife, mother, and related entities are also named in the complaint.
- The charges include violating securities laws and wire fraud.
The Securities and Exchange Commission （SEC） has charged Nader Al-Naji with $257 million fraud in connection with BitClout and BTCLT tokens. The complaint revealed that Al-Naji had been telling investors lies all along. Al-Naji also lied about BitClout being decentralized, according to the SEC. He claimed that the project was “just coins and code” but was behind the project the whole time under the pseudonym “Diamondhands.” The SEC said Al-Naji had also obtained a letter from a prominent law firm to say that BTCLT tokens would not be deemed as securities.
“Al-Naji attempted to evade the federal securities laws and defraud the investing public, mistakenly believing that ‘being “fake” decentralized generally confuses regulators and deters them from going after you,’ said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.
BitClout Founder Charged for Wire Fraud Amid Controversies
BitClout has not been without controversies. Shortly after the Web3 social network was launched in March 2021, it was populated with 15,000 top profiles from X （formerly Twitter）, with their profile coins trading for thousands of dollars. This drew criticism, even a legal case, against the platform as the individuals were not aware or agreed to BitClout.
Protos also accused Al-Naji of inflating the price of BitClout’s tokens （now DESO） ahead of its first exchange listing. The token was listed at $180, traded up to $198.68 ATH, and has since dropped by over 94% to $11.49 at the time of writing.
DESO price change. Source: Coingecko
Al-Naji had also faced accusations of operating a Ponzi scheme in 2017 with Basis Protocol, which allegedly scored investments from Lightspeed and Bain, according to a crypto lawyer, Preston Byrne.
Also, when the guy started BitClout, @HaileyLennonBTC, @stephendpalley and I whacked him with a cease-and-desist (which was most enjoyable to write) demonstrating that his claims Bitclout was decentralized were lies (which is alleged by the DOJ today) https://t.co/ihXM7byiKP
https://twitter.com/prestonjbyrne/status/1818310115956527466
Heavy Charges Against the Founder
The BitClout founder has been taken into custody and charged with one count of wire fraud for the BitClout scheme, which carries a maximum sentence of 20 years. Al-Naji’s wife, mother, and wholly-owned entities were also named defendants in the case for receiving part of the investor funds.
The SEC charged Al-Naji with 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. Gurbir Grewal, Director of the SEC’s Division of Enforcement, remarked on the allegations:
“As alleged in our complaint, Al-Naji attempted to evade the federal securities laws and defraud the investing public, mistakenly believing that ‘being “fake” decentralized generally confuses regulators and deters them from going after you.’ He is obviously wrong: as we have shown time and again, and as reflected in the SEC’s detailed allegations here, 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.”
Analysis
- Regulatory Scrutiny: The SEC’s charges against Nader Al-Naji highlight the importance of regulatory oversight in the cryptocurrency market. This case underscores the need for transparency and honesty in project operations.
- Investor Protection: The allegations of fraud and misuse of investor funds emphasize the risks associated with investing in crypto projects that lack transparency and regulatory compliance.
- Market Impact: The BitClout case serves as a cautionary tale for other crypto projects, signaling that regulatory bodies are closely monitoring and willing to take action against fraudulent activities.