- The Securities and Exchange Commission (SEC) has charged Nader Al-Naji, the founder of the decentralized social network BitClout, with fraud for allegedly lying to investors and misusing their funds.
- The SEC alleges that Al-Naji raised over $257 million in unregistered securities and token sales, claiming the funds would not be used for personal expenses, but he spent $7 million on a Beverly Hills mansion and other personal expenditures.
- The U.S. Department of Justice has also charged Al-Naji, but details of the case have not been revealed.
The founder of controversial crypto social network BitClout is facing fraud charges from both the SEC and Department of Justice in a new high profile legal battle.
Background on the Case
The SEC alleges that former Google engineer Nader Al-Naji raised over $257 million from investors for his startup BitClout but did not use the funds as promised. Instead of furthering BitClout’s development, Al-Naji allegedly spent $7 million on a lavish Beverly Hills mansion and other personal expenditures.
Al-Naji claimed BitClout was a decentralized, autonomous network. But according to the SEC complaint filed on Tuesday, he maintained control behind the scenes.
The SEC accuses Al-Naji of lying to investors about how their funds would be used. This is the core fraud allegation in the case.
Al-Naji was previously behind other crypto startups like DeSo. The Department of Justice has also filed criminal charges against Al-Naji but details remain unknown.
Reaction from the SEC
“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,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.
Background on BitClout
BitClout launched in 2021 with significant investor backing. It was designed as a blockchain-based social network where users could buy and sell tokens tied to real peoples’ identities.
The project quickly ran into controversy over likeness rights and permanently uploading peoples’ images without consent.
Investor enthusiasm for BitClout waned as the network struggled to gain traction. Al-Naji had promised investors their funds would be used for positive goals.
Conclusion paragraph
The SEC complaint paints a picture of an ambitious startup founder who misled investors and misused funds raised for his project. The parallel criminal case from the Justice Department means Al-Naji now faces serious legal jeopardy on both civil and criminal fronts.
