2021's bad thing was (allegedly) even worse than that

The founder of one of the biggest dumpster fires of 2021 has been arrested and charged with fraud.

Why it matters: Sometimes when something looks too bad to be real, it's even worse.

Driving the news: Nader Al-Naji was charged with one count of wire fraud according to federal prosecutors, for alleged misappropriation of funds into a venture he co-created in 2021, called BitClout.

• The SEC also charged Al-Naji, accusing him of creating what appeared to be a decentralized, autonomous project that he had complete control over all along.

Catch up fast: BitClout was a social media site that enabled users to create tokens for their accounts. These tokens could be bought and traded by other users. The more people bought them, in theory, the more they were worth.

• Al-Naji back then described its "core insight" (to me, working for a different outlet), as mixing speculation and content.
• "It's just a matter of time before everybody sees where the right side of history is," he said.

Zoom in: BitClout launched with a growth hack. It compiled a list of the top 15,000 users of crypto Twitter and cloned their profiles so they had a BitClout account (and tokens) at launch.

• Those people could claim their accounts by connecting BitClout with their Twitter account, and they would get a free distribution of some of their own tokens.

Friction point: Having profiles made for them rubbed some people very much the wrong way.

• Pretty soon, early users also realized that BitClout had a one-way design. A person could buy into it, but there was no way to cash out from the protocol, at least not at first. It felt very weird.
• Others raised tough questions about how it handled users' keys (which control their digital assets), as well.

Yes, but: It was backed by a bunch of the best VC firms in the business, including Sequoia, Coinbase Ventures and a16z.

💭 Brady's thought bubble: I was assigned to write about BitClout in 2021 because it was a hot topic, but I didn't want to.

• A lot of folks then were mad that I went into detail about observers' objections.
• Lesson to self: Trust your instincts.

Zoom out: Before BitClout, Al-Naji almost created an algorithmic stablecoin, originally called basecoin, but he got cold feet and gave back investors' money.

• After BitClout, he founded DeSo, which was a social network based on BitClout.

The BFD: For the investor angle on this saga, see today's Pro Rata newsletter.