Founder Of “BitClout” Digital Asset Charged With Fraud In Connection With Sale Of “BitClout” Tokens

Press Release Founder Of “BitClout” Digital Asset Charged With Fraud In Connection With Sale Of “BitClout” Tokens Tuesday, July 30, 2024 Share FacebookLinks to other government and non-government sites will typically appear with the “external link” icon to indicate that you are leaving the Department of Justice website when you click the link. XLinks to other government and non-government sites will typically appear with the “external link” icon to indicate that you are leaving the Department of Justice website when you click the link. LinkedInLinks to other government and non-government sites will typically appear with the “external link” icon to indicate that you are leaving the Department of Justice website when you click the link. Email For Immediate Release U.S. Attorney's Office, Southern District of New York Nader Al-Naji Defrauded Investor of Approximately $3 Million Damian Williams, the United States Attorney for the Southern District of New York, and Christie M. Curtis, the Acting Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the arrest of NADER AL-NAJI, the founder and promoter of the “BitClout” token. AL-NAJI was charged with defrauding a “BitClout” purchaser by making false and misleading representations disclaiming control over the use of the investment funds. AL-NAJI was taken into custody on Saturday, July 27, 2024, and was presented yesterday before a U.S. Magistrate Judge in California. U.S. Attorney Damian Williams said: “BitClout may have been a new token, but Nader Al-Naji’s alleged fraud was nothing new. He allegedly lied to get access to millions of dollars, then gave the money away to family and friends. Today’s arrest signifies this Office’s commitment to holding to account people who use deception to enrich themselves.” FBI Acting Assistant Director in Charge Christie M. Curtis said: “Nader Al-Naji, founder of the BitClout protocol, allegedly lied to investors and misappropriated investments in the protocol for personal expenses and gifts. Failing to properly disclose the use of invested funds disrupts the integrity vital to investing and can breed distrust for future opportunities. The FBI does not tolerate individuals who use false promises and half-truths to exploit well-intended investors of their funds. According to the allegations contained in the Complaint:[1] AL-NAJI is the founder of BitClout, a social media and cryptocurrency trading platform that purportedly allowed users to purchase BitClout tokens using Bitcoin, ostensibly through a decentralized protocol without any centralized issuer, for the purpose of trading BitClout tokens in connection with the social media profiles of other BitClout users. BitClout held itself out as a “cross between a financial app and a social app.” Specifically, BitClout was touted as “a social network built from the ground up as its own custom blockchain. It’s not a company, it has no employees—it’s just code and coins . . . . [W]e refer to BitClout as a ‘protocol’—it is ultimately nothing more than an open-source piece of code running on machines all over the world. No company, just code and coins.” In or about January 2021, AL-NAJI contacted representatives of a prospective investor (“Investor-1”) to discuss the BitClout project and provided Investor-1 with BitClout’s marketing material. On or about January 18, 2021, AL-NAJI met with representatives of Investor-1 and stated, in substance and in part, his intent to use the Bitcoin raised from selling BitClout to develop the BitClout protocol. As part of negotiations with Investor-1, AL-NAJI claimed, in substance, that the role played by his entity was merely to purchase BitClout tokens from the protocol, and that he did not have any control over the funds after the purchase was complete. In fact, contrary to AL-NAJI’s representations to Investor-1, AL-NAJI did maintain control over the proceeds provided by Investor-1 and used them for, among other things, personal expenses and gifts to AL-NAJI’s family members. After inducing Investor-1 to invest approximately $3 million, AL-NAJI routed the funds through multiple accounts for the ultimate benefit of himself and family members. * * * Al-NAJI, 32, of Los Angeles, California, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge. Mr. Williams praised the investigative work of the FBI and also thanked the Securities and Exchange Commission, which has filed a civil enforcement action against the defendant, for its assistance in the investigation. The case is being overseen by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Sarah Mortazavi and Nicholas Folly are in charge of the prosecution. The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty. [1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation. Contact Nicholas Biase, Lauren Scarff, Shelby Wratchford (212) 637-2600 Updated July 30, 2024 Attachment U.S. v. Naji Complaint.pdf [PDF, 316 KB] Topic Financial Fraud Component USAO - New York, Southern Press Release Number: 24-257

Press Release Founder Of “BitClout” Digital Asset Charged With Fraud In Connection With Sale Of “BitClout” Tokens Tuesday, July 30, 2024 Share FacebookLinks to other government and non-government sites will typically appear with the “external link” icon to indicate that you are leaving the Department of Justice website when you click the link. XLinks to other government and non-government sites will typically appear with the “external link” icon to indicate that you are leaving the Department of Justice website when you click the link. LinkedInLinks to other government and non-government sites will typically appear with the “external link” icon to indicate that you are leaving the Department of Justice website when you click the link. Email For Immediate Release U.S. Attorney's Office, Southern District of New York Nader Al-Naji Defrauded Investor of Approximately $3 Million Damian Williams, the United States Attorney for the Southern District of New York, and Christie M. Curtis, the Acting Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the arrest of NADER AL-NAJI, the founder and promoter of the “BitClout” token. AL-NAJI was charged with defrauding a “BitClout” purchaser by making false and misleading representations disclaiming control over the use of the investment funds. AL-NAJI was taken into custody on Saturday, July 27, 2024, and was presented yesterday before a U.S. Magistrate Judge in California. U.S. Attorney Damian Williams said: “BitClout may have been a new token, but Nader Al-Naji’s alleged fraud was nothing new. He allegedly lied to get access to millions of dollars, then gave the money away to family and friends. Today’s arrest signifies this Office’s commitment to holding to account people who use deception to enrich themselves.” FBI Acting Assistant Director in Charge Christie M. Curtis said: “Nader Al-Naji, founder of the BitClout protocol, allegedly lied to investors and misappropriated investments in the protocol for personal expenses and gifts. Failing to properly disclose the use of invested funds disrupts the integrity vital to investing and can breed distrust for future opportunities. The FBI does not tolerate individuals who use false promises and half-truths to exploit well-intended investors of their funds. According to the allegations contained in the Complaint:[1] AL-NAJI is the founder of BitClout, a social media and cryptocurrency trading platform that purportedly allowed users to purchase BitClout tokens using Bitcoin, ostensibly through a decentralized protocol without any centralized issuer, for the purpose of trading BitClout tokens in connection with the social media profiles of other BitClout users. BitClout held itself out as a “cross between a financial app and a social app.” Specifically, BitClout was touted as “a social network built from the ground up as its own custom blockchain. It’s not a company, it has no employees—it’s just code and coins . . . . [W]e refer to BitClout as a ‘protocol’—it is ultimately nothing more than an open-source piece of code running on machines all over the world. No company, just code and coins.” In or about January 2021, AL-NAJI contacted representatives of a prospective investor (“Investor-1”) to discuss the BitClout project and provided Investor-1 with BitClout’s marketing material. On or about January 18, 2021, AL-NAJI met with representatives of Investor-1 and stated, in substance and in part, his intent to use the Bitcoin raised from selling BitClout to develop the BitClout protocol. As part of negotiations with Investor-1, AL-NAJI claimed, in substance, that the role played by his entity was merely to purchase BitClout tokens from the protocol, and that he did not have any control over the funds after the purchase was complete. In fact, contrary to AL-NAJI’s representations to Investor-1, AL-NAJI did maintain control over the proceeds provided by Investor-1 and used them for, among other things, personal expenses and gifts to AL-NAJI’s family members. After inducing Investor-1 to invest approximately $3 million, AL-NAJI routed the funds through multiple accounts for the ultimate benefit of himself and family members. * * * Al-NAJI, 32, of Los Angeles, California, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge. Mr. Williams praised the investigative work of the FBI and also thanked the Securities and Exchange Commission, which has filed a civil enforcement action against the defendant, for its assistance in the investigation. The case is being overseen by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Sarah Mortazavi and Nicholas Folly are in charge of the prosecution. The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty. [1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation. Contact Nicholas Biase, Lauren Scarff, Shelby Wratchford (212) 637-2600 Updated July 30, 2024 Attachment U.S. v. Naji Complaint.pdf [PDF, 316 KB] Topic Financial Fraud Component USAO - New York, Southern Press Release Number: 24-257