BitClout founder Nader Al-Naji gifted his wife $1M from treasury: SEC
Nader Al-Naji, the founder of BitClout and Basis, is now the subject of a civil complaint from the United States Securities and Exchange Commission (SEC) that alleges that he raised more than $257 million in an unregistered security offering.
He has also been charged with a criminal count of wire fraud in the Southern District of New York.
The SEC complaint focuses on the offering of BTCLT, the token for BitClout, which the SEC alleges is an unregistered security.
The SEC highlights that Al-Naji marketed BTCLT as an investment, even comparing it to a “stock that allows you to own a piece of the platform.” Additionally, he communicated with investors in a way that suggested investments would increase in value, noting to one investor that “our most valuable partners should in at the ground floor” because if it raised the funds it expected to then “the protocol price will easily be 4-8x what it is now.”
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Al-Naji apparently believed that the appearance of decentralization was important to avoid the attention of regulators, noting in one communication that his “impression is that even being ‘fake’ decentralized generally confuses regulators and deters them from going after you.”
To maintain this alleged facade, Al-Naji apparently reached out to a law firm to procure an opinion that would state BitClout was not a securities offering. In order to get this law firm to produce this opinion, he had to claim that, “no funds were raised or will be raised to finance the development or upgrade of the network” and that he would not “promote or support listing or trading.”
Humorously, Al-Naji allegedly used the idea that “no funds were raised or will be raised to finance the development” to convince investors to provide funds to finance the development. Additionally, the complaint alleges that Al-Naji used $15 million of the raised funds to get BTCLT listed on Blockchain.com.
The complaint further highlights that despite marketing claims that BitClout was decentralized, Al-Naji controlled the treasury wallet, used the proceeds from the sale of BTCLT for his own benefit, and controlled which investors would have access to the token.
The SEC also says that Al-Naji claimed he would not use treasury funds to pay salaries for the team, but despite those assurances, he used the funds to pay developers and to enrich himself and his family, including:
- renting a mansion in Beverly Hills
- paying off credit cards
- giving out $2.9 million in cash gifts to his family members
- paying for his other cryptocurrency investments
Al-Naji’s wife and mother, as well as the DeSo Foundation, are also named as relief defendants due to the alleged transfers of funds to them.
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