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A decentralized social network or a well-designed scam for almost $260 million.
The founder of the popular cryptocurrency startup BitClout, Nader Al-Naji, is facing charges from the SEC for fraud and illegal securities offering. Al-Naji used a pseudonym to hide from regulators, managing to raise more than $257 million in cryptocurrency.
The decentralized social platform BitClout has received funding from well-known firms such as a16z, Sequoia, Social Capital, Coinbase Ventures and Winklevoss Capital. In the seed round, the company raised about $7 million.
According to the SEC, Al-Naji, known as DiamondHands, assured investors that funds from the sale of BTCLT tokens will not be used for payments to him or employees. However, Al-Naji spent more than $7 million on personal expenses, including the purchase of a mansion in Beverly Hills and gifts for the family. A source close to Al-Naji said the mansion was used for business purposes.
BitClout has been controversial from the start. In 2021, the platform allowed users to buy and sell tokens based on people's reputation. The company copied the profiles of 15,000 Twitter users* without their permission and linked tokens to them, which caused criticism and legal problems. Rio Network co-founder Brandon Curtis demanded to stop using his image without consent. Singapore's former Prime Minister Lee Hsien Loong has asked for his profile to be deleted, saying it was created without permission.
Many investors supported BitClout because of the reputation Al-Naji earned after his previous project Basis. In 2018, Al-Naji raised $140 million to create a stablecoin, but returned the money to investors due to an unfavorable regulatory environment. According to a person close to Al-Naji, investors got back about $0.93 on $1.
In early 2021, Al-Naji raised funding for BitClout, but soon tested the stock market feature, which caused discontent among some investors. As a result, the company focused on the DeSo blockchain, designed to decentralize social networks.
However, many tech leaders defended BitClout. Some investors have invested thousands of dollars in the purchase of tokens. Investors liked the system of motivating users with financial rewards, as well as Al-Naji's "transformative vision".
Al-Naji's hidden identity is a key aspect of the SEC's complaint. The Commission claims that the founder of BitClout gave the impression that there was no company behind BitClout, but only "coins and code", when in fact Al-Naji earned millions of dollars. It is noted that Al-Naji tried to evade federal securities laws and deceive investors.
Al-Naji has not yet commented on the allegations, but has previously expressed confidence in the legitimacy of his startup. He told how he studied the laws on securities and cryptocurrencies, spending $10 million on lawyers.
Source
The founder of the popular cryptocurrency startup BitClout, Nader Al-Naji, is facing charges from the SEC for fraud and illegal securities offering. Al-Naji used a pseudonym to hide from regulators, managing to raise more than $257 million in cryptocurrency.
The decentralized social platform BitClout has received funding from well-known firms such as a16z, Sequoia, Social Capital, Coinbase Ventures and Winklevoss Capital. In the seed round, the company raised about $7 million.
According to the SEC, Al-Naji, known as DiamondHands, assured investors that funds from the sale of BTCLT tokens will not be used for payments to him or employees. However, Al-Naji spent more than $7 million on personal expenses, including the purchase of a mansion in Beverly Hills and gifts for the family. A source close to Al-Naji said the mansion was used for business purposes.
BitClout has been controversial from the start. In 2021, the platform allowed users to buy and sell tokens based on people's reputation. The company copied the profiles of 15,000 Twitter users* without their permission and linked tokens to them, which caused criticism and legal problems. Rio Network co-founder Brandon Curtis demanded to stop using his image without consent. Singapore's former Prime Minister Lee Hsien Loong has asked for his profile to be deleted, saying it was created without permission.
Many investors supported BitClout because of the reputation Al-Naji earned after his previous project Basis. In 2018, Al-Naji raised $140 million to create a stablecoin, but returned the money to investors due to an unfavorable regulatory environment. According to a person close to Al-Naji, investors got back about $0.93 on $1.
In early 2021, Al-Naji raised funding for BitClout, but soon tested the stock market feature, which caused discontent among some investors. As a result, the company focused on the DeSo blockchain, designed to decentralize social networks.
However, many tech leaders defended BitClout. Some investors have invested thousands of dollars in the purchase of tokens. Investors liked the system of motivating users with financial rewards, as well as Al-Naji's "transformative vision".
Al-Naji's hidden identity is a key aspect of the SEC's complaint. The Commission claims that the founder of BitClout gave the impression that there was no company behind BitClout, but only "coins and code", when in fact Al-Naji earned millions of dollars. It is noted that Al-Naji tried to evade federal securities laws and deceive investors.
Al-Naji has not yet commented on the allegations, but has previously expressed confidence in the legitimacy of his startup. He told how he studied the laws on securities and cryptocurrencies, spending $10 million on lawyers.
Source
