Federal securities regulators are suing the founder of the social media project BitClout, now known as Decentralized Social (DeSo).
In its complaint, the U.S. Securities and Exchange Commission (SEC) alleges that since November 2020, Nader Al-Naji raised more than $257 million from unregistered offers and sales of the platform’s token, BTCLT.
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 on personal expenditures, which include rentals for a Beverly Hills payment and extravagant cash gifts.
The SEC also accuses Al-Naji of launching the platform using the pseudonym “Diamondhands” to give the impression that the project is autonomous and decentralized without a controlling company when he was actually behind it.
“In addition, Al-Naji allegedly secured a letter from a prominent law firm opining, based on his mischaracterizations of the nature of his project, that BTCLT were not likely to be deemed securities under federal law.”
Al-Naji is facing charges 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 that DeSo is included in his basket of investments to hedge against inflation.
The DESO token is currently trading for $8.00, down by 23.87% over the past 24 hours.
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