Former Princeton Rower Nader Al-Naji Charged in BitClout Cryptocurrency Fraud

Nader Al-Naji had it all: a first-class education, a resume that included a stint in Googleand connections to top Silicon Valley venture capitalists. Then it all fell apart. This week, the FBI arrested Al-Naji — who called himself “Diamondhands” — for fraud related to a cryptocurrency scam that saw him get hundreds of millions from investors and users to join “BitClout,” a short-lived social network that turned people into stock market investments.

On a indictment filed in New York federal court, the Securities and Exchange Commission alleges that Al-Naji promised investors that BitCloutthat he created by scraping Twitter permissionless profiles, it was decentralized and no one person controlled the funds on the platform. In reality, he was helping himself to the money and spending millions on a six-bedroom mansion in Beverly Hills and extravagant gifts for his wife and mother.

The BitClout debacle wasn’t Al-Naji’s first crypto project. The 32-year-old Los Angeles resident, who was a rower as an undergraduate at Princeton, first caught the crypto world’s attention when he raised $118 million in 2018 to develop a stablecoin. called Base. Unlike other stablecoins, which require a total dollar reserve to create a $1 peg to the U.S. dollar, Basis relied on an algorithm — much like the infamous Terra coin that triggered the 2021 crypto market crash. Al-Naji shut down Basis months after its launch, returning the money. (Al-Naji could not immediately be reached for comment.)

His next foray into crypto didn’t end so well, however. According to the SEC’s indictment, Al-Naji obtained an opinion from a major U.S. law firm stating that his proposed BitClout project did not violate securities laws — but only after lying to the firm’s lawyers about how it actually worked.

According to the indictment, Al-Naji then used legal advice to persuade venture capital firms, including Andreessen Horowitz, to invest in BitClout by offering them a discount to obtain “BTCLT” tokens. Upon launching the site, he invited people to send Bitcoin to purchase BTCLT in order to purchase the avatars he had created for them without permission. While operating under the pseudonym Diamondhands, Al-Naji continued to profess that the platform was decentralized while also selling BTCLT on cryptocurrency exchanges.

As the SEC notes, Al-Naji further misled investors by failing to tell them that once they purchased BTCLT on BitClout, they could not convert it back to Bitcoin. In total, Al-Naji raised $257 million from BitClout, more than half of which came from retail investors. While BTCLT once traded for more than $175,000, it is worth nothing today.

Al-Naji quietly shut down BitClout months after its launch, then raised millions from venture capitalists for a new crypto venture called DeSo (short for “decentralized social”) which has since gone nowhere.

In addition to the civil charges filed by the SEC, the FBI is accusing Al-Naji of electronic fraudwhich carries a maximum sentence of 30 years.

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