Federal securities regulators have filed a lawsuit against the founder of the social media project BitClout, now known as Decentralized Social (DeSo).
In its complaint, the US Securities and Exchange Commission (SEC) alleges that Nader Al-Naji has raised more than $257 million from unregistered offers and sales of the platform’s token, BTCLT, since November 2020.
The regulator says that despite claiming that investor funds will not be used to compensate him or other BitClout employees, Al-Naji used more than $7 million of the proceeds for personal expenses, including rent for a payment in Beverly Hills and extravagant cash gifts.
The SEC also accuses Al-Naji of launching the platform under the pseudonym “Diamondhands” to give the impression that the project is autonomous and decentralized without a controlling company, when in fact he was behind it.
“In addition, Al-Naji allegedly obtained a letter from a leading law firm in which he believed, based on his mischaracterization of the nature of his project, that BTCLT would likely not be considered 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 said DeSo has been included in his basket of investments to hedge against inflation.
The DESO token is currently trading at $8.00, down 23.87% in the last 24 hours.
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