The United States Securities and Exchange Commission (SEC) has hit the founder of decentralized social network BitClout with fraud charges, alleging that he lied to investors and used their cash to fund a lavish lifestyle.
In a separate indictment, the U.S. Department of Justice simultaneously hit Nader Al-Naji, with one count of wire fraud, alleging that he defrauded investors of $3 million.
U.S. Attorney Damian Williams said that Nader “allegedly lied to get access to millions of dollars, then gave the money away to family and friends.”
Al-Naji, 32, of Los Angeles was arrested on Saturday, according to the DOJ. Wire fraud carries a maximum sentence of 20 years.
Starting from 2020, former Google engineer Al-Naji raised over $257 million in unregistered securities and sales of the crypto token BTCLT, the SEC alleged.
But despite telling investors that the money would not be used by him, the SEC further alleged that Al-Naji blew $7 million on a Beverly Hills mansion and other personal expenditures.
BitClout was a project that raised money from top investors back in 2021. But investors bemoaned that the launch was not going to plan at the time.
The brainchild of an anonymous creator named Diamondhands (who later turned out to be Al-Naji), those behind BitClout claimed to do something "good" with money raised from investors but the project eventually lost users.
"All the positive things you put out in the world will cause people to like you and buy your coin," Al-Naji told Decrypt back in 2021 of the project.
In Tuesday's complaint, the SEC alleged that Al-Naji allegedly claimed that the project was decentralized and autonomous when he was behind it.
"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,'" the SEC's Division of Enforcement Director Gurbir S. Grewal said.
Al-Naji was behind a number of crypto ventures, and later launched a larger-scale blockchain project called DeSo.
Edited by Andrew Hayward