The US Securities and Exchange Commission (SEC) ended its civil enforcement action against BitClout founder Nader Al-Naji and several related defendants, saying the decision was “based on the particular facts and circumstances of this case.”
In a joint stipulation filed March 12 in the U.S. District Court for the Southern District of New York, the SEC and Al-Naji agreed to dismiss the case, permanently ending the lawsuit and preventing the agency from filing the same claims again.
The SEC filed the case in July 2024, accusing Al-Naji of violating securities laws through the crypto-based social networking project BitClout, later linked to the decentralized social blockchain DeSo. The SEC and the Department of Justice charged Al-Naji with fraud and selling unregistered securities.
Prosecutors alleged that Al-Naji raised about $257 million from the sale of BitClout’s original token, BTCLT. They alleged he led investors to believe the money would be used to pay him and other BitClout employees, but instead spent “more than $7 million of investor funds on personal expenses,” renting a Beverly Hills mansion and “extravagant cash gifts.”
The suit also named several “accessory defendants,” including Buse Desticioğlu Al-Naji, Joumana Bahouth Al-Naji, Intangible Holdings LLC, Firestorm Media LLC, Viridian City LLC and the DeSo Foundation.
BitClout, which debuted in early 2021, was promoted as a proof-of-work blockchain designed to run and monetize social media, but quickly generated controversy. The platform automatically created profiles for prominent people by scraping their accounts on X, then still known as Twitter, without consent, prompting a cease-and-desist letter from law firm Anderson Kill alleging violations of California’s disclosure law, CoinDesk reported at the time.
Critics also argued that the project’s “creator coin” model could encourage reputational attacks because users could profit from shorting someone’s token while damaging their reputation. Others raised concerns that users had to convert bitcoin to BitClout’s BTCLT token to use the platform without an easy way to convert it back, effectively locking up funds on the site.
Despite the setback, Al-Naji said the project attracted backing from major venture firms including Andreessen Horowitz, Sequoia, Coinbase Ventures and Digital Currency Group.
Al-Naji and the defendants waived any claim for attorneys’ fees or damages in connection with the investigation or litigation.
