- The SEC has charged BitClout founder.
- The regulator accused the founder of engaging in a multimillion-dollar fraud scheme.
- The founder faces a parallel action by the U.S. Attorneyโs Office for the Southern District of New York.
On Tuesday, the U.S. Securities and Exchange Commission (SEC) charged Nader Al-Naji, the founder of the social media platform BitClout, with perpetrating a multimillion-dollar fraudulent cryptocurrency scheme.
The SEC alleged that starting in November 2020, Al-Naji raised over $257 million from unregistered offers and sales of BitCloutโs native token BTCLT, which he reportedly misrepresented through a letter from a prominent law firm as โnot likely to be deemed securities under federal laws.โ
Sponsored
โTo avoid regulatory scrutiny, Al-Naji portrayed BitClout as a decentralized project with โno company behind it โฆ just coins and code,โ and launched the project using the pseudonym โDiamondhandsโ to further create the illusion that the project was autonomous when he was actually behind the project,โ the SEC said in a press release.
At the same time, the regulator suspected that Al-Naji secretly told certain investors that he was involved in the subterfuge to avoid compliance with the law.
While Al-Naji had promised investors that proceeds wouldnโt be used to compensate him or other BitClout employees, he allegedly spent over $7 million of investor funds on personal expenditures like extravagant cash gifts to family members and rental payments for a Beverly Hills mansion.
The SECโs Action
Per the statement, the SEC has filed a complaint 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 anti-fraud provisions of the Securities Exchange Act of 1934.
โThe dedicated staff of the SEC uncovered Al-Najiโs lies and will now hold him accountable for misleading investors,โ Gurbir S. Grewal, Director of the SECโs Division of Enforcement, stated.
The SECโs complaint has mentioned Al-Najiโs spouse, mother, and wholly-owned entities as relief defendants for the investor funds that Al-Naji transferred to them. Meanwhile, the U.S. Attorneyโs Office for the Southern District of New York initiated a parallel action against Al-Naji today.
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