The founder of BitClout, Nader Al-Naji, has been charged with a $257 million fraud case by the US Securities and Exchange Commission (SEC) and the Department of Justice (DOJ). The charges allege that Al-Naji orchestrated a fraudulent crypto asset scheme involving BitClout and its native token BTCLT.
According to the complaint filed by the securities regulator, Al-Naji raised over $257 million through unregistered offers and sales of BTCLT in November 2020. Despite claiming that the funds would not be used for his or other BitClout employees’ compensation, Al-Naji allegedly spent over $7 million on personal expenses, such as renting a mansion in Beverly Hills and giving lavish cash gifts to family members.
The SEC also accused Al-Naji of portraying BitClout as a decentralized project to avoid regulatory scrutiny and create the impression that no company was behind it. Using the pseudonym “Diamondhands,” he tried to give the illusion of autonomy. Additionally, Al-Naji obtained a letter from a law firm based on mischaracterizations, suggesting that BTCLT were not securities under federal law and misled investors about legal compliance.
In response to the charges, Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, stated that Al-Naji attempted to evade federal securities laws and defraud the investing public by believing that being “fake” decentralized would confuse regulators and deter them from taking action. However, the SEC emphasized that they are guided by economic realities, not cosmetic labels.
The complaint also names Al-Naji’s wife, mother, and wholly-owned entities as relief defendants for the investor funds he directed to them. The US Attorney’s Office for the Southern District of New York has brought charges against Al-Naji in a parallel investigation.
In light of these developments, investors are advised to exercise caution and conduct thorough research before investing in any cryptocurrency or related projects. It is crucial to verify the legitimacy of the platforms and tokens to avoid falling victim to fraudulent schemes.
As the cryptocurrency market continues to evolve, regulatory authorities are stepping up efforts to combat fraud and protect investors. By staying informed and being vigilant, individuals can make informed decisions and navigate the crypto landscape safely and responsibly.