(HedgeCo.Net) The Securities and Exchange Commission has charged Nader Al-Naji with perpetrating a multi-million-dollar fraudulent crypto asset scheme involving a social media platform called BitClout and its native token of the same name (herein, “BTCLT”).
According to the SEC’s complaint, starting in November 2020, Al-Naji raised more than $257 million from unregistered offers and sales of BTCLT, while falsely telling investors that proceeds would not be used to compensate him or other BitClout employees. In reality, the complaint alleges, Al-Naji spent more than $7 million of investor funds on personal expenditures like rental payments for a Beverly Hills mansion and extravagant cash gifts to family members. The SEC’s complaint further alleges that, to avoid regulatory scrutiny, Al-Naji portrayed BitClout as a decentralized project with “no company behind it … just coins and code,” and launched the project using the pseudonym “Diamondhands” to further create the illusion that the project was autonomous when he was actually behind the project. In addition, Al-Naji allegedly secured a letter from a prominent law firm opining, based on his mischaracterizations of the nature of his project, that BTCLT were not likely to be deemed securities under federal law. At the same time, Al-Naji allegedly secretly told certain investors that he was engaged in this subterfuge to avoid compliance with the law.
“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. “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 that Al-Naji transferred to them. In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced charges against Al-Naji.
