SEC Charges Nader Al-Naji in Multi-Million Dollar BitClout Fraud Scheme
The Securities and Exchange Commission (SEC) has charged Nader Al-Naji with running a multi-million dollar fraudulent crypto asset scheme involving the social media platform BitClout and its native token, BTCLT.
Fraudulent Fundraising and Misuse of Investor Funds
According to the SEC’s complaint, Al-Naji raised over $257 million from unregistered sales of BTCLT starting in November 2020. He falsely assured investors that the proceeds would not be used to compensate him or BitClout employees. Instead, Al-Naji allegedly spent over $7 million of investor funds on personal expenses, including rent for a Beverly Hills mansion and lavish gifts for family members.
Deceptive Practices to Avoid Regulation
The SEC alleges that Al-Naji portrayed BitClout as a decentralized project to evade regulatory scrutiny. Using the pseudonym “Diamondhands,” he aimed to create the illusion of an autonomous project. Al-Naji also secured a letter from a prominent law firm, based on mischaracterizations, stating that BTCLT was not likely to be deemed securities under federal law. However, he secretly told certain investors that these actions were to avoid compliance with the law.
SEC’s Statement
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, stated, “Al-Naji attempted to evade federal securities laws and defraud the investing public. As we have shown time and again, we are guided by economic realities, not cosmetic labels.” The SEC’s complaint was filed in the U.S. District Court for the Southern District of New York, charging Al-Naji with violating the registration and anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. It also names Al-Naji’s wife, mother, and wholly owned entities as relief defendants for the investor funds he transferred to them.
