Former Princeton Rower Nader Al-Naji Charged with Crypto Fraud BitCloud

Nader Al-Naji had it all: an Ivy League education, a resume that included a stint at Googleand connections to Silicon Valley’s top venture capitalists. Then it all came crashing down. This week, the FBI arrested Al-Naji, who went by the name “Diamondhands,” for fraud related to a cryptocurrency scam that saw him take hundreds of millions from investors and users to join “BitClout,” a short-lived social network that turned people into stock market investors.

In a accusa filed in federal court in New York, the Securities and Exchange Commission alleges that Al-Naji promised investors that BitCloutwhich he created by scraping Chirping profiles without permission, it was decentralized, and no one controlled the funds on the platform. In reality, he was taking the money himself, spending millions on a six-bedroom mansion in Beverly Hills and extravagant gifts for his wife and mother.

The BitClout fiasco wasn’t Al-Naji’s first cryptocurrency project. The 32-year-old Los Angeles resident, who was a rower while an undergraduate at Princeton, first came to the cryptocurrency world’s attention when he raised $118 million in 2018 to develop a stablecoin. called BaseUnlike other stablecoins, which require a full reserve of dollars to create a $1 peg to the U.S. dollar, Basis was based on an algorithm, much like the infamous Terra coin that triggered the cryptocurrency market crash in 2021. Al-Naji, however, pulled the plug on Basis months after its launch, returning the money. (Al-Naji could not immediately be reached for comment.)

His subsequent foray into cryptocurrency didn’t end so neatly. According to the SEC’s indictment, Al-Naji obtained an opinion from a major U.S. law firm that his proposed BitClout project wasn’t infringing securities, but only after lying to the firm’s lawyers about how it actually worked.

According to the indictment, Al-Naji then used the legal advice to convince venture capital firms, including Andreessen Horowitz, to invest in BitClout by offering them a discount to obtain “BTCLT” tokens. After launching the site, he invited people to send Bitcoin to purchase BTCLT in order to purchase avatars he had created for them without permission. While operating under the alias Diamondhands, Al-Naji continued to profess that the platform was decentralized, even selling BTCLT on cryptocurrency exchanges.

As the SEC notes, Al-Naji further misled investors by failing to tell them that once they purchased BTCLT on BitClout, they could not convert it back to Bitcoin. In total, Al-Naji raised $257 million on Bitclout, more than half of which came from retail investors. While BTCLT once traded for over $175, it is now worthless.

Al-Naji quietly shut down BitClout months after its launch, and then raised millions of dollars from venture capitalists for a new crypto venture called DeSo (short for “decentralized social”) which has since led to nothing.

In addition to the civil charges filed by the SEC, the FBI is accusing Al-Naji of telematic fraudwhich carries a maximum sentence of 30 years.

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