Key Highlights
- The U.S. Securities and Exchange Commission dropped its fraud lawsuit against Nader Al-Naji, the founder of BitClout
- The SEC had accused Al-Naji of raising about $257 million by selling the BTCLT token as an unregistered security
- The case was dropped after the SEC reviewed the evidence, during a time when the regulator is changing its approach to crypto regulation
The U.S. Securities and Exchange Commission has agreed to drop its civil fraud lawsuit against Nader Al-Naji, the founder of the blockchain-based social media project BitClout, which is now known as DeSo.
According to court documents filed this week in the Southern District of New York, the regulator and Al-Naji jointly agreed to dismiss the case.
How the case started
The lawsuit was first filed in July 2024 and accused Al-Naji of selling unregistered securities through BitClout’s native token, BTCLT. After reviewing the evidence and the details of the case, the SEC decided that dismissing the lawsuit was appropriate.
The dismissal was made “with prejudice,” which means the same legal claims cannot be brought again in the future. According to the filing, Al-Naji will not pay any penalties or fines as part of the decision.
The case was originally based on claims that Al-Naji raised about $257 million from investors through the sale of the BTCLT token. Regulators said the project was promoted as a decentralized platform with no central authority controlling it.
Al-Naji even launched the platform using the online name “Diamondhands” to support the idea that the project did not have a single operator behind it. However, the SEC argued that he still controlled key parts of the platform. According to the complaint, he managed the creation of tokens, controlled their pricing, and oversaw the main treasury wallet that held investor funds.
Claims about misusing investor’s fund
Authorities also accused him of using investor money for personal expenses. According to the complaint, about $7 million was spent on luxury living costs, including leasing a mansion in Beverly Hills and sending money to family members. These actions were questioned because investors had been told the treasury funds would not be used for personal compensation.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, previously stated that Al-Naji “attempted to evade the federal securities laws and defraud the investing public, mistakenly believing that pretending to be decentralized would confuse regulators.”
A changing approach to crypto rules
Meanwhile, the decision to drop the lawsuit comes at a time when the SEC is adjusting how it handles the crypto industry. In January 2025, then-acting chairman Mark T. Uyeda launched a crypto task force to help the agency create clearer rules for digital assets.
The effort has continued under SEC chairman Paul Atkins. Since then, the regulator has stepped back from several cases involving major crypto firms, including actions against companies such as Coinbase and Binance.
BitClout’s story
BitClout first appeared in 2021 as a new type of social media platform built on blockchain technology. The idea was to turn social media popularity into a tradable asset where users would buy and sell assets related to a public figure, allowing others to invest in the popularity of a person. It was a popular project, attracting the attention of venture companies like Andreessen Horowitz, Sequoia Capital, and Coinbase Ventures.
Despite early excitement, the project later faced criticism over its claims of decentralization and questions about how user data was collected. As it grew and faced legal action, the project was renamed to DeSo, which stands for Decentralized Social.
Also Read: CBI Cracks Down on GainBitcoin in India, Arrests CTO Over $720M Scam
