SEC drops lawsuit against BitClout founder Nader Al-Naji over DeSo crypto project

The U.S. 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, the U.S. District Court for the Southern District of New York, the SEC and Al-Naji agreed to close the case, ending the litigation permanently and preventing the agency from refiling the same claims.

The SEC filed the lawsuit in July 2024, accusing Al-Naji of violating securities laws through the crypto-based social network project BitClout, later associated with the decentralized social blockchain DeSo. The SEC and Department of Justice charged Al-Naji with wire fraud and the sale of unregistered securities.

The charges claimed Al-Naji raised approximately $257 million from the sale of BitClout’s native 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 expenditures,” renting a mansion in Beverly Hills and “extravagant cash gifts.”

The case also named several “relief 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 drew controversy. The platform automatically created profiles for prominent figures 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 right-of-publicity law, CoinDesk reported at the time.

Critics also argued the project’s “creator coin” model could incentivize reputational attacks, because users could profit from shorting someone’s token while damaging their reputation. Others raised concerns that users had to convert bitcoin into BitClout’s BTCLT token to use the platform without an easy way to convert it back, effectively locking funds on the site.

Despite the backlash, 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 relief defendants waived any claims for attorney’s fees or damages related to the investigation or litigation.