BitClout Founder Al-Naji Faces Over $257M Fraud Scheme

The United States Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) charged Nader Al-Naji with orchestrating a fraudulent multibillion-dollar crypto asset scheme involving social media platform BitClout and its native token BTCLT.

The securities regulator’s complaint revealed that Al-Naji raised more than $257 million through unregistered offers and sales of BTCLT in November 2020. In the process, the executive allegedly misled investors in stating that the funds would not be used for their compensation or for BitClout’s other employees.

However, the complaint accuses Al-Naji of spending more than $7 million of those funds on personal expenses, including renting a Beverly Hills mansion and giving lavish cash gifts to family members.

According to the complaint published earlier this week, the SEC alleged that Al-Naji portrayed BitClout as a decentralized project to evade regulatory scrutiny and give the impression that no company was behind it. He is believed to have used the pseudonym “Diamondhands” to create the illusion of autonomy.

The SEC also claimed that Al-Naji obtained a letter from a prominent law firm, based on his mischaracterizations, suggesting that BTCLT were not probable securities under federal law and even told certain investors that he was engaging in this subterfuge to avoid legal compliance.

Commenting on the charges, Gurbir S. Grewal, director of the SEC’s Division of Enforcement, said:

“As alleged in our complaint, Al-Naji attempted to circumvent federal securities laws and defraud the investing public, mistakenly believing that ‘being ‘fake’ decentralized generally confuses regulators and prevents them from going after you.” He is obviously wrong: As we have demonstrated time and time again, and as reflected in the SEC’s detailed pleadings here, we are driven by economic realities, not cosmetic labels.”

Al-Naji’s wife, mother and wholly-owned entities are also named in the complaint as defendants in siphoning off investment funds he directed to them. In a parallel investigation, the U.S. Attorney’s Office for the Southern District of New York has filed charges against Al-Naji.

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