SEC Charges BitClout Founder Nader Al-Naji with $257M Crypto Fraud

The United States Securities and Exchange Commission (SEC) has charged Nader Al-Naji the founder of the social media platform BitClout of orchestrating a fraudulent multi-million-dollar cryptocurrency scheme.

SEC Charges Against BitClout Founder

According to court documents, from November 2029, Al-Naji raised over $257 million from unregistered offers and sales of BitClout’s native token, BTCLT.

He also misled investors about the use of funds claiming that the proceeds would not be used for personal compensation.

However, Al-Naji spent more than $7 million of investors’ funds on personal items including rent on a six-bedroom Beverly Hills mansion and extravagant cash gifts to family, the SEC said.

Furthermore, the agency alleged that Al-Naji attempted to avoid regulatory scrutiny by portraying BitClout as a decentralized project with no company behind it, using the pseudonym “Diamondhands” to create an illusion of autonomy.

In addition to using a pseudonym, the regulator pointed out that Al-Naji secured a legal opinion from a prominent law firm, based on mischaracterized project details, suggesting that BTCLT tokens would not be classified as securities under federal law.

“He is obviously wrong: as we have shown time and again, and as reflected in the SEC’s detailed allegations here, we are guided by economic realities, not cosmetic labels. The dedicated staff of the SEC uncovered Al-Naji’s lies and will now hold him accountable for misleading investors,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.

The SEC’s lawsuit accuses Al-Naji of violating securities registration requirements and anti-fraud laws. Interestingly, the complaint also names Al-Naji’s wife, mother and wholly owned entities as relief defendants for the investor funds they allegedly received.

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York has announced criminal charges against Al-Naji.

BitClout Controversy

Introduced in 2021, BitClout was promoted as a social media platform and cryptocurrency exchange built on blockchain technology. However, the project was controversial from the beginning.

BitClout starkly divided the crypto community at the time of launch, mainly because it created profiles for prominent names in the crypto space without their permission, which included scraping and copying their X (formerly Twitter) profiles onto the BitClout site.