PANews reported on July 30 that the U.S. Securities and Exchange Commission (SEC) disclosed on its official website that it accused Nader Al-Naji of implementing a fraudulent crypto asset scheme worth hundreds of millions of dollars involving a social media platform called BitClout and its native token of the same name (hereinafter referred to as "BTCLT").
According to the SEC's lawsuit, starting in November 2020, Al-Naji raised more than $257 million through an unregistered offering and sale of BTCLT, while falsely claiming that the proceeds would not be used to compensate him or other BitClout employees. In fact, the lawsuit alleges that Al-Naji used more than $7 million of investor funds for personal expenses, such as paying rent on a Beverly Hills mansion and lavish cash gifts for family members.
The SEC's complaint further alleges that in order to evade regulation, Al-Naji portrayed BitClout as a decentralized project with "no company behind it...just tokens and code" and used the pseudonym "Diamondhands" to launch the project, further creating the illusion of autonomy when in fact he was the driving force behind the project. In addition, Al-Naji allegedly obtained a letter from a well-known law firm that argued that BTCLT was unlikely to be considered a security under federal law based on his false description of the nature of the project. At the same time, Al-Naji allegedly told certain investors in secret that he used this ruse to evade legal sanctions.
The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, charges Naji with violating the registration and antifraud provisions of the Securities Act of 1933 and the antifraud provisions of the Securities Exchange Act of 1934. The complaint also names Naji’s wife, mother, and entities wholly owned by them as defendants, seeking restitution for investor funds that Naji transferred to them. In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced charges against Naji today.