The U.S. Securities and Exchange Commission (SEC) has accused Nader Al-Naji, the founder of Bitclout (now rebranded as Decentralized Social), of orchestrating a multi-million-dollar fraudulent cryptocurrency scheme. According to the SEC, Al-Naji raised over $257 million through unregistered sales of Bitclout tokens (BTCLT) and misused these funds for personal expenditures. The regulator noted that Al-Naji attempted to bypass regulatory oversight by presenting Bitclout as a decentralized project and using a pseudonym.
In a statement released on Tuesday, the SEC detailed the charges against Al-Naji, highlighting his role in creating a fraudulent scheme centered around a social media platform called Bitclout and its associated token. The founder, operating under the pseudonym "Diamondhands," aimed to mislead regulators and investors about the true nature of the project.
The SEC alleges that starting in November 2020, Al-Naji began raising funds through the unregistered sale of BTCLT tokens, accumulating over $257 million. The complaint asserts that Al-Naji deceived investors regarding the intended use of these funds, which were instead used for personal luxuries, such as renting a mansion in Beverly Hills and bestowing generous cash gifts to family members.
To further his deceptive scheme, Al-Naji purportedly presented Bitclout as a decentralized venture, claiming it was autonomous and beyond regulatory reach. He even secured a legal opinion, based on false representations, to support the notion that BTCLT were not securities.
Gurbir S. Grewal, Director of the SEC's Division of Enforcement, remarked, "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.’"
In addition to the SEC’s charges, the U.S. Attorney’s Office for the Southern District of New York has also announced charges against Al-Naji. The legal repercussions for Al-Naji could be significant, given the scale of the alleged fraud and the amount of money involved.
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