The U.S. Securities and Exchange Commission (SEC) has charged Nader Al-Naji, the founder of the decentralized social network BitClout, with fraud and the issuance of unregistered securities.
On July 30, the SEC announced that Al-Naji raised over $257 million through unregistered sales of BitClout’s native token, BTCLT. According to the SEC’s complaint, Al-Naji misled investors by claiming that the funds would not be used for personal expenses.
Contrary to this assurance, he allegedly used more than $7 million for personal luxuries, including rent for a Beverly Hills mansion and lavish gifts.
Deceptive practices surrounding BitClout
The complaint from the SEC details how Al-Naji attempted to circumvent regulatory oversight by presenting BitClout as a fully decentralized endeavor while actually being the driving force behind it. Masked under the alias “Diamondhands,” he created the image of an independent platform, distancing himself from any corporate obligations.
Al-Naji allegedly obtained a misleading legal opinion from a law firm, inaccurately stating that BTCLT tokens likely did not fall under securities regulation. He discreetly disclosed to specific investors that this approach was a calculated maneuver to evade legal obligations.
Director of the SEC’s Division of Enforcement, Gurbir S. Grewal, criticized Al-Naji’s actions, stating:
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,
However, Grewal made it clear that the SEC’s inquiry uncovered Al-Naji’s deceitful actions. Grewal affirms the Commission’s dedication to ensure he faces consequences for deceiving investors.
Moreover, the complaint filed also implicates Al-Naji’s wife, mother, and his owned entities as relief defendants for allegedly receiving investor funds. In parallel, the U.S. Attorney’s Office for the Southern District of New York has brought charges against Al-Naji.
