SEC Charges BitClout Founder Nader Al-Naji in a $257M Crypto Fraud Case

• The SEC has charged BitClout founder.
• The regulator accused the founder of engaging in a multimillion-dollar fraud scheme.
• The founder faces a parallel action by the U.S. Attorney’s Office for the Southern District of New York.

On Tuesday, the U.S. Securities and Exchange Commission ( SEC ) charged Nader Al-Naji, the founder of the social media platform BitClout, with perpetrating a multimillion-dollar fraudulent cryptocurrency scheme.

The SEC alleged that starting in November 2020, Al-Naji raised over $257 million from unregistered offers and sales of BitClout’s native token BTCLT, which he reportedly misrepresented through a letter from a prominent law firm as “not likely to be deemed securities under federal laws.”

“To avoid regulatory scrutiny, Al-Naji portrayed BitClout as a decentralized project with “no company behind it … just coins and code,” and launched the project using the pseudonym “Diamondhands” to further create the illusion that the project was autonomous when he was actually behind the project,” The SEC said in a press release .

At the same time, the regulator suspected that Al-Naji secretly told certain investors that he was involved in the subterfuge to avoid compliance with the law.

While Al-Naji had promised investors that proceeds wouldn’t be used to compensate him or other BitClout employees, he allegedly spent over $7 million of investor funds on personal expenditures like extravagant cash gifts to family members and rental payments for a Beverly Hills mansion.

The SEC’s Action

Per the statement, the SEC has filed a complaint in the U.S. District Court for the Southern District of New York, charging 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 dedicated staff of the SEC uncovered Al-Naji’s lies and will now hold him accountable for misleading investors.” Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, stated.

The SEC’s complaint has mentioned Al-Naji’s spouse, mother, and wholly-owned entities as relief defendants for the investor funds that Al-Naji transferred to them. Meanwhile, the U.S. Attorney’s Office for the Southern District of New York today initiated a parallel action against Al-Naji.

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