Founder of the BitClout blockchain platform Nader Al-Naji has found himself at crosshairs with the Securities and Exchange Commission (SEC). This follows after the regulator recently slammed Al-Naji with charges bordering on wire fraud and civil securities violations per a Tuesday CoinDesk report.
According to the SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, Al-Naji put together a fraudulent scheme that helped him steal over $257 million through unregistered sales of the BTCLT token.
Al-Naji allegedly deceived unsuspecting investors into thinking that funds raised from the token sale would be used solely for the development of BitClout. However, he went on to use over $7 million to fund his lavish lifestyle, which included rental payments on a Beverly Hills mansion and cash gifts to relatives.
Notably, the credibility that the BitClout project enjoyed when it first started has all to do with Al-Naji’s reputation as a successful businessman. That, and the significant venture capital backing for his previous brainchild Basis. Al-Naji was able to raise $133 million in investment for Basis, successfully attracting several big-name investors, including Bain Capital Ventures, Google Ventures, and Andreessen Horowitz.
His amazing track record was enough grounds for BitClout to build upon before later rebranding to DeSo (Decentralized Social). Despite its growth to over 1.5 million accounts and 200 applications, the project is now under intense scrutiny from regulators.
Federal Regulators Crack Down on Misconduct in Landmark BitClout Case
The SEC argues that Al-Naji, using the pseudonym “Diamondhands,” misrepresented BitClout as a decentralized platform. He passed across the message that BitClout had no company behind it, that it was all coins and code. Whereas the reality was far from that.
Al-Naji also allegedly sought a legal opinion letter that mischaracterized BTCLT tokens to evade securities laws, further compounding the fraud allegations.
In light of these offences, the SEC has filed criminal charges against Al-Naji. His wife, mother, and associated businesses have also been named as relief defendants due to their receipt of misappropriated funds.
