News
BitClout Founder Accused of Multi-Million Dollar Cryptocurrency Fraud
Nader Al-Naji, the founder of BitClout, now known as Decentralized Social (DeSo), is facing serious charges. The SEC and the U.S. Attorney’s Office for the Southern District of New York have charged him with fraud and selling unregistered securities.
Misuse of Funds and False Statements
The SEC alleges that Al-Naji raised $257 million via BitClout’s native token, BTCLT. He allegedly misused $7 million of these funds for personal expenses. He even used the money to rent a mansion in Beverly Hills and give cash gifts to family members. Despite promising that the funds would not be used to compensate BitClout team members, Al-Naji allegedly spent lavishly on personal luxuries.
Deceptive practices and misleading investors
Al-Naji’s actions went beyond financial abuse. SEC claims deceived investors by falsely presenting BitClout as a decentralized project. He used the alias “DiamondHands” to hide his identity. Al-Naji’s efforts to appear decentralized included obtaining a misleading opinion from a major law firm that BTCLT was not a security. The SEC cites these deceptive practices as part of the charges against him.
Source: SEC
Legal consequences and impact on the sector
The Department of Justice has also charged Al-Naji with wire fraud. If convicted, he faces up to 20 years behind bars. The charges are not limited to Al-Naji, but extend to Al-Naji’s family members as well. They are named as defendants for receiving funds from investors. BitClout’s initial controversy arose from their launch strategy. They scraped 15,000 Twitter profiles without consent. This led to legal challenges and public backlash. They also received a cease and desist letter from Rio Network’s Brandon Curtis.
Investor Reactions and Future Outlook
Thanks to his previous success with a stablecoin project called Basis, Al-Naji was able to raise significant funding from well-known companies such as a16z, Sequoia, and Coinbase Ventures. Investors received back funding from this project when regulatory challenges arose.
Conclusion
This is not the first case of this kind. There have been numerous projects that have mistreated investors’ money and used it for personal pleasure. Although keeping investors’ money and trust safe is a big responsibility, not everyone takes it that way.
The allegations against Nader Al-Naji highlight the importance of transparency and accountability in the cryptocurrency space. Investors should remain vigilant and perform due diligence before investing in any project.
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