NEW YORK – A California entrepreneur who wanted to culturally merge bitcoin and social media by allowing people to bet on the future popularity of celebrities and influencers has been arrested on fraud charges.
Nader Al-Naji, 32, was arrested in Los Angeles on Saturday on wire fraud charges against him in New York, and civil charges were brought against him by federal authorities in Tuesday.
He appeared in federal court Monday in Los Angeles and was released on bail.
Authorities said Al-Naji defrauded investors who poured hundreds of millions of dollars into his BitClout business. They say he promised that the money would be used only for business but instead he took millions of dollars to himself, his family and other employees of his company.
Al-Naji’s lawyer did not respond to an email seeking comment.
The Securities and Exchange Commission said in a civil lawsuit filed in Manhattan federal court that Al-Naji first designed BitClout in 2019 as a social media platform that promised to be a “kind of a social media channel that combines fantasy and social media. .”
The BitClout platform invited investors to monetize their social media content and invest in the accounts of others with ”Creator Coins” valued at tied to a person’s reputation” or ”public standing” the Commission said.
It said that every user of the platform was able to generate coins by creating a profile while BitClout is loading profiles for the “top 15,000 influencers from Twitter” on the platform and have coins. minted” or created for them.
If any of the selected influencers enters the platform and declares their accounts, they can receive a share of the coin associated with their accounts, the SEC said.
In marketing materials, BitClout said its coins were “a new type of asset class tied to the reputation of an individual, rather than a company or asset,” the executive said. said.
”Thus, people who believe in a person’s potential can buy the coin and become financially successful when that person recognizes their potential,” BitClout said in its marketing material, according to the Securities and Exchange Commission.
From the end of 2020 until March 2021, Al-Naji requested investments to support the development of BitClout from venture capital funds and other prominent investors in the crypto-asset community, the commission said .
It said he told prospective investors that BitClout was an organized project with “no company behind it… just coins and code.” and adopted the pseudonym “Diamondhands” to hide his leadership and operational control.
The Securities and Exchange Commission said he told a would-be investor: ”My view is that even being ‘fake’ is generally classified to confuse regulators and prevent them from going after you. .”
In total, BitClout raised $257 million for its treasury wallet from investors without registering, as required, with the Securities and Exchange Commission, the organization said.
In the meantime, it says, BitClout spent “a large amount of investment funds on expenses that were completely unrelated to the development of the BitClout platform” even though it had promised investors that it will not happen.
The Securities and Exchange Commission said Al-Naji used investment money to pay for his living expenses, including renting a six-bedroom mansion in Beverly Hills, and made lavish gifts of about some $1 million to his wife and mother. with private equity funds in other crypto asset projects.
It said Al-Naji has also transferred financial funds to BitClout developers, programmers, and developers, contrary to his public statements that he would not use the funds to pay for himself or team members. of BitClout update.
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