Nader Al-Naji, the founder of BitClout, has been charged by the US Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) for allegedly running a multi-million-dollar fraudulent crypto scheme involving the BitClout platform and its token, BTCLT.
Fraud Allegations
According to the SEC’s recent complaint, Al-Naji raised over $257 million through unregistered sales of BTCLT in November 2020. He is accused of deceiving investors by presenting BitClout as a decentralized project under the alias “Diamondhands,” falsely implying it was not controlled by a single entity. The SEC asserts that Al-Naji was, in fact, in complete control.
Misappropriation of Funds
Despite assurances to investors that the funds would not be used for personal compensation or for other BitClout employees, the complaint alleges that Al-Naji spent over $7 million on personal luxuries, such as renting a Beverly Hills mansion and giving large cash gifts to family members.
Evasion of Regulatory Scrutiny
To avoid regulatory oversight, Al-Naji allegedly obtained a letter from a major law firm, based on false information, claiming that BTCLT were not likely to be classified as securities under federal law. The SEC also claims Al-Naji informed some investors that he was engaging in these tactics to circumvent legal requirements.
SEC’s Response
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, commented on the charges: “As outlined in our complaint, Al-Naji tried to bypass federal securities laws and mislead the investing public, mistakenly thinking that pretending to be decentralized would deter regulators. He was wrong: as we have demonstrated repeatedly, and as detailed in the SEC’s allegations, we focus on economic realities, not superficial labels.”
Additional Parties Involved
The complaint also names Al-Naji’s wife, mother, and wholly-owned entities as relief defendants, alleging that investor funds were funneled to them. The US Attorney’s Office for the Southern District of New York has also brought charges against Al-Naji in a parallel investigation.
Conclusion
The charges against Nader Al-Naji highlight the necessity for transparency and compliance with securities laws in the cryptocurrency market. The actions of the SEC and DOJ emphasize their ongoing commitment to protecting investors and ensuring the integrity of financial markets.
