The U.S. Securities and Exchange Commission has agreed to dismiss a civil fraud lawsuit against Nader Al-Naji, 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 Alnaji of soliciting unregistered securities through the sale of BitClout’s native token, BTCLT.
Al Naji allegedly pitched BitClout as a decentralized project with no central operator and even launched the platform under the pseudonym “Diamondhands.” The SEC alleged that despite these allegations, he maintained control over the token issuance, pricing, and Treasury wallet where investors’ funds were stored.
The complaint also alleged that Al-Naji misused investor funds, spending millions of dollars on personal expenses such as luxury homes and sending money to family members, while publicly stating that state funds would not be used for personal compensation.
In a joint stipulation, the SEC said it reevaluated the evidentiary record and the circumstances of the case and determined that dismissal was appropriate. The parties agreed to dismiss the case with prejudice regarding the conduct alleged in the complaint.
Alnaji founded BitClout in 2021 as a Twitter-like decentralized platform where users can invest in tokens representing social influence. The project was funded by top venture investors including a16z, Sequoia, and Coinbase Ventures.
After facing criticism for scraping user data, questions about its decentralization, and even legal issues, the platform was renamed DeSo (Decentralized Social).
Prior to BitClout, Alnaji launched Basis, an algorithmic stablecoin project, which secured over $133 million in 2018 from prominent investors including Bain Capital Ventures, a16z, and Lightspeed.
Kevin Warsh, who was nominated by President Donald Trump to be Federal Reserve Chairman, participated in the round as an angel investor, but withdrew from the project when it was shut down later that year.
