SEC Charges BitClout Founder With $257M Crypto Fraud Scheme

The U.S. Securities and Exchange Commission (SEC) has charged Nader Al-Naji, the founder of the BitClout blockchain protocol, with orchestrating a fraudulent crypto asset scheme involving more than $257 million.

What Happened: The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, alleges that since November 2020, Al-Naji misled investors by falsely claiming that the funds raised would not be used for personal gain.

Contrary to these assurances, Al-Naji allegedly spent more than $7 million of investor money on personal expenses, including rent for a Beverly Hills mansion and substantial cash gifts to family members.

To further avoid detection, Al-Naji portrayed BitClout as a decentralized project with “no company behind it,” creating the illusion of autonomy while he was secretly at the helm.

Also Read: What Is Going On With Bitcoin, Ethereum ETFs Ahead Of The FOMC Meeting?

The complaint also details how Al-Naji obtained a legal opinion from a prominent law firm, based on misrepresentations, suggesting that BTCLT tokens would not be classified as securities under federal law.

Despite these efforts, Al-Naji allegedly admitted to certain investors that his actions were intended to evade legal compliance.

Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, emphasized that the agency is guided by economic realities rather than cosmetic labels when investigating potential securities law violations.

What’s Next: As the cryptocurrency industry grapples with these legal challenges, the broader implications for digital assets and regulatory compliance will be a focal point at Benzinga’s Future of Digital Assets event on Nov. 19.

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