The Securities and Exchange Commission (SEC) has filed charges against the founder of BitClout, alleging securities fraud. Nader Al-Naji (aka Diamondhands) is said to have raised over $257 million in a scheme for the sale of unregistered securities – the token BTCLT.
Simultaneously, criminal charges have been filed against Al-Naji in the Southern District of New York. The Federal Bureau of Investigation has arrested Al-Naji on Saturday, July 27, 2024.
Al-Naji is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison.
BitClout is described as a “cross between a financial app and a social app” built on blockchain. The entity claimed no employees, just “code and coins.”
According to the SEC’s complaint, Al-Naji spent more than $7 million of investor funds on personal expenditures like renting a Beverly Hills mansion and cash gifts to family members.
Gurbir Grewal, Director of the SEC’s Division of Enforcement, said that Al-Naji sought to evade securities laws alleging that being decentralized would deter regulators to pursue the offering.
“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.”
The SEC’s complaint also names Al-Naji’s wife, mother, and wholly-owned entities as relief defendants for the investor funds that Al-Naji transferred to them.
BitClout was featured in a post by Sequoia, available on Medium, in 2021.
