steered millions of dollars to himself<\/a>, his family and some of his company\u2019s workers.<\/p>\nA lawyer for Al-Naji did not respond to an email seeking comment.<\/p>\n
The Securities and Exchange Commission said in a civil complaint filed in Manhattan federal court that Al-Naji began designing BitClout in 2019 as a social media platform with an interface that promised to be a \u201cnew type of social network that mixes speculation and social media.\u201d<\/p>\n
The BitClout platform invited investors to monetize their social media profile and to invest in the profiles of others through \u201cCreator Coins\u201d whose value was \u201ctied to the reputation of an individual\u201d or their \u201cstanding in society,\u201d the commission said.<\/p>\n
It said each platform user was able to generate a coin by creating a profile while BitClout preloaded profiles for the \u201ctop 15,000 influencers from Twitter\u201d onto the platform and had coins \u201cminted\u201d or created for them.<\/p>\n
If any of the designated influencers joined the platform and claimed their profiles, they could receive a percentage of the coins associated with their profiles, the SEC said.<\/p>\n
In promotional materials, BitClout said its coins were \u201ca new type of asset class that is tied to the reputation of an individual, rather than to a company or commodity,\u201d the regulator said.<\/p>\n
\u201cThus, people who believe in someone\u2019s potential can buy their coin and succeed with them financially when that person realizes their potential,\u201d BitClout said in its promotional materials, according to the Securities and Exchange Commission.<\/p>\n
From late 2020 through March 2021, Al-Naji solicited investments to fund BitClout\u2019s development from venture capital funds and other prominent investors in the crypto-asset community, the commission said.<\/p>\n
It said he told prospective investors that BitClout was a decentralized project with \u201cno company behind it \u2026 just coins and code\u201d and adopted the pseudonym \u201cDiamondhands\u201d to hide his leadership and control of the operation.<\/p>\n
The Securities and Exchange Commission said he told one prospective investor: \u201cMy impression is that even being \u2018fake\u2019 decentralized generally confuses regulators and deters them from going after you.\u201d<\/p>\n
In all, BitClout generated $257 million for its treasury wallet from investors without registering, as required, with the Securities and Exchange Commission, the agency said.<\/p>\n
Meanwhile, it said, BitClout spent \u201csignificant sums of investor funds on expenses that were entirely unrelated to the development of the BitClout platform\u201d even though it had promised investors that would not happen.<\/p>\n
The Securities and Exchange Commission said Al-Naji used investor funds to pay his own living expenses, including renting a six-bedroom Beverly Hills mansion, and he gave extravagant gifts of cash of at least $1 million each to his wife and his mother, along with funding personal investments in other crypto asset projects.<\/p>\n
It said Al-Naji also transferred investor funds to BitClout developers, programmers, and promoters, contrary to his public statements that he wouldn\u2019t use investor proceeds to compensate himself or members of BitClout\u2019s development team.<\/p>\n<\/div>\n
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