SEC drops fraud case against BitClout founder Nader ‘Diamondhands’ Al-Naji

The US Securities and Exchange Commission has agreed to dismiss its civil fraud lawsuit against Nader Al-Naji, the founder of the BitClout blockchain project, now DeSo, according to a joint stipulation filed this week in the Southern District of New York.

The SEC originally filed the lawsuit in July 2024, accusing Al-Naji of conducting an unregistered securities offering through the sale of BTCLT, the native token of BitClout.

Al-Naji allegedly marketed BitClout as a decentralized project with no central operator, even launching the platform under the pseudonym “Diamondhands.” The SEC claimed that despite these claims, he maintained control over token issuance, pricing, and the treasury wallet holding investor funds.

The complaint also alleged that Al-Naji misused investor funds, spending millions on personal expenses, including luxury housing and transfers to family members, while publicly stating that treasury funds would not be used for personal compensation.

In the joint stipulation, the SEC said it reevaluated the evidentiary record and circumstances of the case and decided dismissal was appropriate. The parties agreed to dismiss the litigation with prejudice for the conduct alleged in the complaint.

Al-Naji founded BitClout in 2021 as a decentralized, Twitter-like platform where users could invest in tokens representing social influence. The project received funding from top venture investors such as a16z, Sequoia, and Coinbase Ventures.

After facing criticism for scraping user data and questions about its decentralization, as well as legal challenges, the platform was renamed DeSo (Decentralized Social).

Prior to BitClout, Al-Naji launched Basis, an algorithmic stablecoin project that secured more than $133 million from prominent investors, including Bain Capital Ventures, a16z, and Lightspeed in 2018.

Kevin Warsh, Donald Trump’s Fed chair pick, participated in the round as an angel investor but exited the project later that year when the project shut down.