SEC Charges BitClout Founder Nader Al-Naji With $257M Cryptocurrency Fraud
On Tuesday, July 30, 2024, the U.S. Securities & Exchange Commission filed a complaint in the United States District Court for the Southern District of New York alleging securities fraud against Nader Al-Naji and several relief defendants related to the offer and sale of a cryptocurrency token called BTCLT on the BitClout blockchain platform.
The complaint alleges that Al-Naji conceived of and created both the BitClout social media platform and its native cryptocurrency token BTCLT. According to the SEC, from November 2020 through the present, Al-Naji raised over $257 million from U.S. and foreign investors by unlawfully offering and selling BTCLT as an unregistered security.
The SEC claims Al-Naji marketed BTCLT to investors as an opportunity to profit from the growth of the BitClout platform. Investors could purportedly buy BTCLT, which would increase in value as more users joined the platform and engaged with it, driving up demand for the token. Al-Naji is accused of promoting BTCLT as “stock that allows you to own a piece of the platform” and that its value was tied to the success of BitClout.
While Al-Naji sold BTCLT through direct contractual sales to venture capital funds and prominent crypto investors starting in January 2021, he is alleged to have made contradictory public statements about BitClout’s structure. To avoid regulatory scrutiny, Al-Naji reportedly portrayed BitClout as a “decentralized” project with “no company behind it” controlled autonomously by code, when in fact he controlled the issuance of BTCLT and the funds raised from sales.
In March 2021, Al-Naji publicly launched BitClout under the anonymous online alias “Diamondhands” and permitted the general public to purchase BTCLT through the platform. The SEC claims he subsequently misappropriated significant sums, over $2.9 million, from investor funds for lavish personal expenses like a Beverly Hills mansion rental rather than using the funds as represented to develop the platform.
The complaint names Al-Naji’s wife and mother as relief defendants, alleging they received funds to which they had no entitlement. It also lists BitClout-related companies incorporated by Al-Naji as relief defendants, claiming they received investor money which should be subject to disgorgement.
If the allegations are proven, the SEC asserts Al-Naji violated the anti-fraud and registration provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The commission is seeking injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties from Al-Naji and the relief defendants.
Please contact BlockTribune for access to a copy of this filing.
