SEC, DOJ charge BitClout founder Nader Al-Naji
The founder, who went by the pseudonym Diamondhands, was accused of using investor funds for personal use
Artwork by Crystal Le
BitClout creator Nader Al-Naji, who went by the pseudonym Diamondhands, was charged by the US Securities and Exchange Commission and the Department of Justice on Tuesday.
The SEC alleges that Al-Naji conducted a “multi-million dollar fraudulent crypto asset scheme involving a social media platform called BitClout and its native token of the same name.”
A complaint against the founder alleges that he raised over $250 million in the unregistered sales and offerings of BTCLT. The funds, he supposedly claimed to investors, wouldn’t go to him or his team.
Al-Naji spent over $7 million of investor funds, according to the regulatory agency.
“Among other expenditures, Al-Naji used investor funds to: pay his own living expenses, including the rental of a six-bedroom mansion in Beverly Hills and personal credit card payments; fund extravagant gifts of cash (of at least $1 million each) to his wife, Relief Defendant Buse Desticioğlu Al-Naji, and his mother Relief Defendant Joumana Bahouth Al-Naji,” the complaint said.
Read more from our opinion section: Crypto crime is too easy
The founder was also charged by the DOJ’s Southern District of New York office.
“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,’” said Gurbir S. Grewal, director of the SEC’s division of enforcement.
In 2021, Al-Naji rebranded BitClout to DeSo, or “decentralized social,” opening the network up to apps other than BitClout. He initially raised over $200 million from firms such as Andreessen Horowitz and Winklevoss Capital.
BitClout’s operational bitcoin wallet, which collected BTC during its initial coin offering, still contains 2,525 BTC ($167.3 million). It originally raised 5,039 BTC ($333.8 million at current prices).
Al-Naji’s previously faced criticism, including being accused of operating Ponzi schemes.
Byrne, a crypto lawyer, wrote about the Al-Naji-linked algorithmic stablecoin Basis back in 2017 before it failed in 2018.
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