SEC dismisses legal action against BitClout’s Nader Al-Naji.

The regulator concluded its civil enforcement action alleging the DeSo creator committed wire fraud and sold unregistered crypto securities.

SEC agrees to dismiss case against founder of BitClout. (AgnosticPreachersKid-Wikipedia Commons/Modified by CoinDesk)

What to know:

• The U.S. Securities and Exchange Commission has permanently concluded its civil enforcement action against BitClout founder Nader Al-Naji, referencing the specific facts and circumstances surrounding the case.
• The ruling, which was formalized in a joint stipulation submitted on March 12 to the Southern District of New York, prohibits the SEC from reinstating the same securities allegations related to BitClout and its BTCLT token.
• The lawsuit had accused Al-Naji of generating around $257 million via unregistered securities and misappropriating over $7 million of investor funds, while also naming various associated entities and individuals as relief defendants.

The U.S. Securities and Exchange Commission (SEC) has concluded its civil enforcement action against BitClout founder Nader Al-Naji and several associated defendants, stating that the decision was “based on the particular facts and circumstances of this case.”

In a joint stipulation submitted on March 12, the U.S. District Court for the Southern District of New York, the SEC and Al-Naji consented to terminate the case, permanently concluding the litigation and preventing the agency from re-filing the same claims.

The SEC initiated the lawsuit in July 2024, alleging that Al-Naji violated securities laws through the crypto-based social networking project BitClout, which later became linked to the decentralized social blockchain DeSo. The SEC and Department of Justice charged Al-Naji with wire fraud and the sale of unregistered securities.

The allegations asserted that Al-Naji raised approximately $257 million from the sale of BitClout’s native token, BTCLT. They claimed he misled investors into believing that the funds would be allocated for his and other BitClout employees’ compensation, but instead utilized “more than $7 million of investor funds for personal expenses,” including renting a mansion in Beverly Hills and providing “lavish cash gifts.”

The case also identified several “relief defendants,” such as Buse Desticioğlu Al-Naji, Joumana Bahouth Al-Naji, Intangible Holdings LLC, Firestorm Media LLC, Viridian City LLC, and the DeSo Foundation.

BitClout, which launched in early 2021, was presented as a proof-of-work blockchain intended to operate and monetize social media, but soon faced criticism. The platform automatically generated profiles for notable individuals by extracting their information from X, previously known as Twitter, without their consent, leading to a cease-and-desist letter from law firm Anderson Kill for alleged violations of California’s right-of-publicity law, CoinDesk reported at that time.

Critics also contended that the project’s “creator coin” model could promote reputational harm, as users could profit from short selling someone’s token while damaging their reputation. Concerns were also raised that users needed to convert bitcoin into BitClout’s BTCLT token to access the platform, with no straightforward method to revert it, effectively locking their funds on the site.

Despite the criticism, Al-Naji noted that the project received support from prominent venture capital firms including Andreessen Horowitz, Sequoia, Coinbase Ventures, and Digital Currency Group.

Al-Naji and the relief defendants relinquished any claims for attorney’s fees or damages associated with the investigation or litigation.