The Securities and Exchange Commission (SEC) has charged Nader Al-Naji with orchestrating a fraudulent crypto asset scheme involving the social media platform BitClout and its native token, BTCLT. The SEC’s complaint alleges that Al-Naji raised over $257 million from unregistered sales of BTCLT starting in November 2020, under false pretenses that the proceeds would not be used for personal gain. Contrary to these claims, Al-Naji allegedly spent over $7 million of investor funds on personal expenses, including a Beverly Hills mansion rental and lavish gifts to family members.
To avoid regulatory scrutiny, Al-Naji allegedly misrepresented BitClout as a decentralized project with no company backing, using the pseudonym “Diamondhands” to create the illusion of autonomy. He reportedly secured a legal opinion from a prominent law firm, based on false representations, stating that BTCLT were unlikely to be considered securities under federal law. Simultaneously, he allegedly informed select investors that he was using these tactics to evade legal compliance.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, stated, “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. The dedicated staff of the SEC uncovered Al-Naji’s lies and will now hold him accountable for misleading investors.”
The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, charges Al-Naji with 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 Al-Naji’s wife, mother, and wholly-owned entities as relief defendants for the investor funds transferred to them.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York has also announced charges against Al-Naji.
The SEC’s investigation was conducted by Geoff Gettinger, with assistance from Sejal Bhakta and Pasha Salimi. It was supervised by Paul Kim and Jorge G. Tenreiro, Acting Chief of the Enforcement Division’s Crypto Assets and Cyber Unit. The SEC’s litigation will be led by Christopher Carney and Mr. Gettinger, under the supervision of James Connor and Mr. Tenreiro.
