Founder of crypto project BitClout charged with fraud
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Federal prosecutors have charged Nader Al-Naji, a crypto entrepreneur, with fraud connected to BitClout, a crypto project for making digital tokens out of the Twitter (now X) likeness of celebrities and other users.
Why it matters: This is the latest venture-backed crypto endeavor to end in criminal charges.
State of play: Al-Naji was charged with one count of wire fraud, and was taken into custody on July 27.
- He also faces civil charges from the U.S. Securities and Exchange Commission in relation to BitClout.
Zoom in: Prosecutors allege that in the course of raising funding for the project, Al-Naji —who used the pseudonym "Diamondhands" — portrayed BitClout as a decentralized endeavor with no company behind it.
- The SEC alleges he obtained a letter from a prominent law firm that concluded, based on his misrepresentations of the project, that the crypto token was not likely to be deemed a security."
- "Al-Naji spent more than $7 million of investor funds on personal expenditures like rental payments for a Beverly Hills mansion and extravagant cash gifts to family members," according to the SEC's announcement.
Flashback: BitClout starkly divided the crypto community at the time of launch, mainly because it minted social profiles for prominent blockchain influencers on Twitter without their permission.
- Investors in the original project include Sequoia, Andreessen Horowitz, Social Capital, TQ Ventures, Coinbase Ventures, Winklevoss Capital, Arrington Capital, Polychain, Pantera, Digital Currency Group, Huobi, Variant and even some celebrities.
