Nader Al-Naji, founder of BitClout, has been charged with wire fraud and the sale of unregistered securities, raising over $257 million through deceptive practices.
Points
- Nader Al-Naji raised over $257 million through unregistered sales of BitClout’s native token, BTCLT.
- He is accused of misappropriating $7 million for personal expenses.
- BitClout was launched under the pseudonym “Diamondhands” to avoid regulatory scrutiny.
- The SEC and DOJ have charged Al-Naji with violating securities laws and wire fraud.
- Al-Naji’s wife, mother, and related entities are also named in the complaint.
The US Securities and Exchange Commission （SEC） and Department of Justice （DoJ） charged Nader Al-Naji, the founder of the crypto social media platform BitClout, with wire fraud and the sale of unregistered securities. He was arrested last Saturday and presented before a California judge on Monday.
The Controversial BitClout Platform
According to the announcement yesterday （Tuesday）, Al-Naji, known by his pseudonym “Diamondhands,” raised more than $257 million from unregistered offers and sales of BTCLT, BitClout’s native token. He allegedly misappropriated $7 million of investor funds for personal expenditures, including rental payments for a Beverly Hills mansion and extravagant cash gifts to family members.
BitClout made waves following its launch in 2021 as an alternative to centralized social media platforms. The platform controversially added profiles of celebrities and people with large followings by copying their publicly available photos and data, mostly from X （formerly Twitter）. At that time, Al-Naji received a cease-and-desist letter from law firm Anderson Kill, claiming that the project’s use of data without consent violated California’s laws.
The SEC’s announcement further alleged that Al-Naji portrayed BitClout as a decentralized project with “no company behind it” and launched it under a pseudonym to avoid regulations.
U.S. Securities and Exchange Commission@SECGovToday we charged Nader Al-Naji with perpetrating a multi-million-dollar fraudulent crypto asset scheme involving a social media platform called BitClout and its native token of the same name.
Jul 30, 2024
Heavy Charges Against the Founder
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. The SEC’s complaint also named Al-Naji’s family, including his wife and mother, as he transferred investor funds to them.
In parallel, the DoJ charged the BitClout founder with one count of wire fraud, which carries a maximum prison sentence of 20 years. 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 Oversight: The SEC and DoJ’s actions highlight the need for regulatory oversight in the crypto market to protect investors from fraudulent schemes.
- Investor Awareness: This case serves as a reminder for investors to conduct thorough due diligence and be cautious of projects that lack transparency.
- Legal Consequences: The charges against Al-Naji emphasize the legal risks associated with violating securities laws and engaging in deceptive practices.