The SEC has charged BitClout founder Nader Al-Naji with fraud and misuse of funds, alleging he misled investors and misappropriated millions.
Points
- Nader Al-Naji is accused of selling unregistered securities and defrauding investors.
- The SEC alleges misuse of $7 million in customer funds for personal expenses.
- Al-Naji falsely claimed BitClout was decentralized.
- The SEC’s complaint also names Al-Naji’s wife, mother, and related entities.
- HighKey Agency founders claim the SEC’s allegations are specific to BitClout.
On July 30, the United States Securities and Exchange Commission （SEC）, alongside the US Attorney’s Office for the Southern District of New York, announced charges against BitClout founder Nader Al-Naji. The SEC’s complaint alleges that Al-Naji sold $257 million in unregistered securities through BitClout’s native token, BTCLT, and defrauded investors by misusing a portion of those funds.
The SEC also named Decentralized Social （DeSo）, a newer project from Al-Naji, in the complaint and a corresponding press release. More specifically, the complaint accused Al-Naji of spending $7 million in customer funds on luxury items like leasing a Beverly Hills mansion and giving generous cash gifts to family members despite promising investors that funds would not be used as compensation for any BitClout team members.
The SEC’s complaint claimed that Al-Naji also mischaracterized the core inner workings of the BitClout project. According to the securities regulator, the BitClout founder misled investors and legal firms by claiming the project was decentralized, with no governing company controlling it, yet was running the project behind the scenes.
Gurbir S. 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.’”
Additionally, Al-Naji’s wife, mother, and related business entities were also listed in the complaint as relief defendants because they were alleged recipients of investor funds from the BitClout founder.
In a statement to Cointelegraph, Jordan and Luke Lintz, founders of HighKey Agency, a publications agency that also invests in the Decentralized Social project, said that the SEC’s allegations were against BitClout and claimed that the DeSo treasury remains untouched. The brothers said they knew nothing about Al-Naji’s personal life and didn’t comment on the alleged personal reimbursements to family members specified in the SEC’s complaint.
Analysis
- Regulatory Action: The SEC’s charges highlight the importance of compliance with securities laws in the crypto space.
- Investor Protection: Misleading claims about decentralization can undermine investor trust and lead to significant legal consequences.
- Market Reactions: The response from HighKey Agency emphasizes the potential impact on related projects and the broader crypto market.