As a seasoned crypto investor who has witnessed the rise and fall of numerous projects, I must say that the allegations against Nader Al-Naji and BitClout have left me both disheartened and unsurprised. The SEC’s complaint paints a picture of deception and misdirection that is all too familiar in the wild west of cryptocurrency.
On Tuesday, Nader Al-Naji, inventor of the open-source social media network built on blockchain technology known as BitClout, faced accusations from both the United States Securities and Exchange Commission (SEC) and the Department of Justice (DOJ). These charges stemmed from an alleged fraudulent crypto operation worth millions of dollars that connected to the BitClout platform and its token, BTCLT.
Allegations Against BitClout Founder
The SEC’s accusation paints a concerning portrait of Al-Naji’s behavior, suggesting that from November 2020 onwards, he collected more than $257 million through unregistered transactions and sales of BTCLT. They claim he misled investors by promising them that the funds would not be used for personal benefit, which was untrue.
Instead, the grievance suggests that Al-Naji allegedly used over seven million dollars of investors’ money for personal expenditures such as lavish gifts and rent on a luxurious residence in Beverly Hills.
The SEC’s allegation adds to the confusion, implying that Al-Naji made significant efforts to present BitClout as a decentralized platform without any governing body. He used the alias “Diamondhands” to uphold the facade of independence.
According to reports, Al-Naji is said to have manipulated legal opinions to classify BTCLT as non-securities, by concealing its true characteristics from the public. Simultaneously, he is believed to have discreetly informed a few investors about his deceptive tactics in the project.
Gurbir S. Grewal, head of the Securities and Exchange Commission’s (SEC) Division of Enforcement, underscored the seriousness of the matter, indicating that Al-Naji’s efforts to dodge securities regulations and deceive investors would not be tolerated.
Grewal further stated in the release:
I stand firm on my claims: over and over again, it’s evident that our actions are driven by practical, economic factors, not superficial tags. The diligent investigators at the SEC have unmasked Al-Naji’s deceit and will now ensure he faces consequences for misguiding investors.
Regulatory Storm Brews
In simpler terms, the accusations against Al-Naji could have serious legal consequences. The U.S. Securities and Exchange Commission (SEC) has filed a complaint against him in a court in New York’s Southern District. This complaint accuses him of breaking rules related to registration and anti-fraud activities, which date back to the Securities Act of 1933 and the Securities Exchange Act of 1934.
Furthermore, in the complaint disclosed on July 30 by the SEC, Al-Naji’s wife, mother, and related parties are mentioned as defensive parties for funds that were reportedly moved to them from investor donations.
Crypto attorney Preston Byrne has voiced his opinion on the matter, pointing out previous warnings concerning Al-Naji’s actions. This includes his alleged participation in the Basis Ponzi scheme back in 2017 and doubts about BitClout’s claimed decentralization, which is now being investigated by authorities such as the Department of Justice.
The timeframe for any potential sentence that Al-Naji might face, should he be found guilty, has yet to be revealed by the agency. This information remains undisclosed, as they plan to share more details once the trial begins.
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2024-07-31 12:12