The founder of crypto trading and social media platform BitClout is being accused of duping investors and trying to avoid regulators.
The U.S. Securities and Exchange Commission (SEC) alleged that the platform’s founder, Nader Al-Naji, illegally raised more than US$257 million from investors in an unregistered offering by selling tokens issued by the BitClout platform, which purported to function as a decentralized protocol.
The SEC alleged that Al-Naji misled investors about the true operation of the platform, and by allegedly spending more than US$7 million of the proceeds from the unregistered crypto offering on personal expenses, which wasn’t disclosed to investors.
“From at least November 2020 until the present, defendant Al-Naji raised more than US$257 million by offering and selling crypto asset securities to investors while lying to them about the supposedly ‘decentralized’ nature of the project he was promoting and while illegally diverting millions of investor funds into luxury purchases to enrich himself, his close relatives, and his companies,” the regulator said in its complaint.
The SEC also said that, in an effort to evade regulatory scrutiny, Al-Naji tried to portray BitClout as a decentralized platform with “no company behind it … just coins and code.”
The regulator alleged that Al-Naji actually controlled the tokens’ issuance and price and controlled the blockchain wallet that held the proceeds from tokens’ issuance.
On Tuesday, the SEC charged Al-Naji with violating the registration and anti-fraud provisions of securities laws, while the U.S. Attorney’s Office for the Southern District of New York charged him with one count of wire fraud.
The allegations have not yet been proven.