A 32-year-old California entrepreneur, Nader Al-Naji, has been taken into custody in Los Angeles on a wire fraud charge stemming from his BitClout venture, which aimed to combine bitcoin culture with social media. Al-Naji appeared in federal court in Los Angeles and was released on bail following his arrest on Saturday. Additionally, civil claims have been filed against him by federal regulatory authorities in New York.
Allegations against Al-Naji include deceiving investors who had invested hundreds of millions of dollars into BitClout by assuring them that the money would be solely used for the business. However, authorities claim that instead of directing the funds toward the venture, Al-Naji allegedly diverted millions of dollars to himself, his family, and certain company employees.
The Securities and Exchange Commission has filed a civil complaint in Manhattan federal court stating that Al-Naji initiated the development of BitClout in 2019 to create a social media platform blending speculation with social networking. BitClout enabled users to monetize their social media profiles and invest in others through “Creator Coins” linked to individuals’ reputation or societal standing.
BitClout attracted investments in late 2020 through March 2021 from venture capital funds and prominent figures in the crypto-asset community, raising $257 million without registering with the Securities and Exchange Commission as required. Despite promoting BitClout as a decentralized project, Al-Naji reportedly controlled the operation under the alias “Diamondhands.”
The Securities and Exchange Commission accused Al-Naji of using investor funds unlawfully for personal expenditures, such as renting a Beverly Hills mansion and giving large cash gifts to his wife and mother. Moreover, funds were allegedly transferred to BitClout developers and promoters, contradicting statements that investor proceeds wouldn’t be utilized for personal compensation.
Al-Naji’s lawyer has not responded to requests for comment regarding the allegations. Following his arrest and court appearance, the case against him continues as regulatory authorities address the alleged fraudulent activities associated with BitClout.