SEC Sues BitClout Founder, Alleging He Raised $257M in Unregistered Token Sales

Federal securities regulators are suing the founder of the social media project BitClout, now known as Decentralized Social (DeSo).

The founder of social media project BitClout, now known as Decentralized Social (DeSo), is being sued by federal securities regulators over the unregistered sale of the platform’s token.

According to the complaint filed by the U.S. Securities and Exchange Commission (SEC) on Wednesday, Nader Al-Naji raised more than $257 million from the offering and sale of BitClout’s token, BTCLT, since November 2020.

The regulator alleges that Al-Naji used more than $7 million of the proceeds for personal expenditures, including a Beverly Hills lease payment and large cash gifts, despite stating that investor funds would not be used to compensate him or other BitClout employees.

The SEC also claims that Al-Naji launched the platform using the pseudonym “Diamondhands” to give the impression that the project is autonomous and decentralized without a controlling company, when he was actually the one controlling it.

“In addition, Al-Naji allegedly secured a letter from a prominent law firm opining, based on his mischaracterizations of the nature of his project, that BTCLT were not likely to be deemed securities under federal law.”

Al-Naji is accused of violating the registration and anti-fraud provisions of the Securities Act of 1933 and the anti-fraud provisions of the Securities Exchange Act of 1934.

In 2021, billionaire investor Chamath Palihapitiya revealed that DeSo is part of his basket of investments to hedge against inflation.

The price of a DESO token is currently $8.00, down 23.87% over the last 24 hours.

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