The US Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) charged Nader Al-Naji with orchestrating a multi-million-dollar fraudulent crypto asset scheme involving the social media platform BitClout and its native token BTCLT.
The securities regulator’s complaint revealed that Al-Naji raised over $257 million through unregistered offers and sales of BTCLT in November 2020. In the process, the exec allegedly misled investors by claiming the funds would not be used for his or other BitClout employees’ compensation.
However, the complaint accuses Al-Naji of spending over $7 million of these funds on personal expenses, including renting a mansion in Beverly Hills and giving lavish cash gifts to family members.
According to the complaint released earlier this week, the SEC alleged that Al-Naji portrayed BitClout as a decentralized project to evade regulatory scrutiny and give the impression that no company was behind it. He is believed to have used the pseudonym “Diamondhands” to create the illusion of autonomy.
The SEC also claimed that Al-Naji secured a letter from a prominent law firm, based on his mischaracterizations, suggesting BTCLT were not likely securities under federal law and even told certain investors that he was engaging in this subterfuge to avoid legal compliance.
Commenting on the charges, Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said,
“As alleged in our complaint, Al-Naji attempted to evade the federal securities laws and defraud the investing public, mistakenly believing that ‘being “fake” decentralized generally confuses regulators and deters them from going after you.’ 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.”
Al-Naji’s wife, mother, and wholly-owned entities are also named in the complaint as relief defendants for the investor funds he directed to them. In a parallel investigation, the US Attorney’s Office for the Southern District of New York has brought charges against Al-Naji.