The Securities and Exchange Commission (SEC) today charged Nader Al-Naji with perpetrating a fraudulent multi-million dollar crypto scheme involving a social media platform called BitClout and its eponymous native token (BTCLT).
According to the SEC complaint, since November 2020, Al-Naji raised more than $257 million from unregistered offers and sales of BTCLT while falsely telling investors that the proceeds would not be used to compensate himself or other employees of BitClout. In fact, according to the complaint, Al-Naji spent more than $7 million of investment funds on personal expenses, including rent payments on a Beverly Hills mansion and extravagant cash gifts to family members.
The SEC complaint further alleges that, to avoid regulatory scrutiny, Al-Naji presented BitClout as a decentralized project with “no company behind it … just coins and code” and launched the project using the alias “Diamondhands ” to further create the illusion that the project was self-contained when in fact it was behind the project.
In addition, Al-Naji allegedly secured a letter from a prominent law firm saying, based on his mischaracterizations of the nature of his work, that BTCLT was not likely to be considered a title under federal law. At the same time, Al-Naji allegedly secretly told some investors that he had engaged in this undermining to avoid complying with the law.
The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, accuses Al-Naji of 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 The complaint also names his wife, mother, and wholly owned entities as defendants for the investors’ funds transferred to them by Al-Naji.
In a separate action, the US Attorney’s Office for the Southern District of New York today announced charges against Al-Naji.