Key Insights
- SEC charges BitCloud founder Nader Al-Naji with fraud involving $257 million raised through unregistered token sales.
- Al-Naji allegedly misled investors about the project’s decentralized nature and spent over $7 million on personal expenses, including a Beverly Hills mansion.
NEW YORK (MarketsXplora) – The U.S. Securities and Exchange Commission (SEC) has charged Nader Al-Naji, the 32-year-old founder of blockchain platform BitClout, with fraud involving over $257 million raised through unregistered token sales, the agency announced on Tuesday.
Al-Naji allegedly misled investors about the decentralized nature of the project and misused funds for personal expenses, according to a complaint filed in the U.S. District Court for the Southern District of New York.
The SEC claims Al-Naji raised millions by selling BTCLT tokens while falsely assuring investors that the proceeds would not be used for personal or employee reimbursements. However, the agency alleges that Al-Naji spent more than $7 million of investors’ funds on personal items, including rent for a six-bedroom Beverly Hills mansion and “extravagant cash gifts” to family members.
“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, in a statement.
The complaint also names Al-Naji’s wife and mother as defendants. In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against Al-Naji on the same day.
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Al-Naji, previously known by the pseudonym Diamondhands, revealed his identity in 2021 when launching “Decentralized Social,” a blockchain project that received $200 million in funding from prominent venture capital firms.
“This action sends a clear message that the SEC will continue to scrutinize crypto projects, regardless of their claims of decentralization,” a securities law expert told MarketsXplora, speaking on condition of anonymity due to the sensitivity of the matter.