Founder Of Bitclout Charged By The SEC For Stealing $7 Million From Investors

Key Points:

• Founder of BitClout Nader Al-Naji is charged with fraud and selling unregistered securities for the alleged misuse of $7 million of investor funds.
• The SEC claims that Al-Naji lied about BitClout being decentralized in an effort to avoid its many applicable laws.

Nader Al-Naji, CEO of the top crypto social media platform, BitClout, is now being accused of serious charges by the SEC and DoJ.

Read more: US SEC Chairman Gensler Faces Early 2025 Resignation Rumors

Founder of BitClout Charged With Fraud Over Misused Funds

Al-Naji, also known by his pseudonym "Diamondhands," is being accused of wire fraud and selling unlicensed securities. Federal prosecutors have reportedly charged the founder of BitClout with misappropriating millions of dollars of investor money through the sale of the social token network's native token, BTCLT.

The SEC information claims that the founder of BitClout raised $257 million together with BTCLT but diverted over $7 million for personal use. That amount included lavish spending — renting a Beverly Hills mansion and making huge cash presents to members of his family. Al-Naji was arrested on Saturday and appeared before a magistrate judge in California on Monday.

According to the SEC's complaint, Al-Naji represented BitClout as a decentralized project without a controlling company. The regulator also accused him of acquiring a falsely based legal opinion to falsely suggest to investors that his BTCLT tokens were not securities under federal law.

Gurbir S. Grewal of the Division of Enforcement at the SEC criticized what he called Al-Naji's attempt to do an end-run around the regulatory framework; the complaint reads that the SEC looks to the economic realities underlying an offering, not to labels or other peculiarities of form.

Besides the founder of Bitclout, the wife, mother, and related entities have been individually named as relief defendants by the SEC for purportedly receiving a portion of the misappropriated funds. At the same time, the U.S. Attorney's Office for the Southern District of New York has revealed criminal charges against him.

Al-Naji Case Shines A Light on Regulatory Action

The case is a part of the larger, sweeping crackdown on the cryptocurrency industry, in keeping with ongoing litigation by the SEC against accused Binance and its co-founder, Changpeng Zhao. The SEC further updated its lawsuit against some crypto assets and adjusted its stance over their status as securities.

BitClout has raised a lot of attention and controversy because it has minted digital profiles for celebrities without their permission. Backed by prominent investors and venture firms, the project is now further dividing the crypto community over its mission.