SEC v. NADER AL-NAJI, No. 1:24-cv-05738, Southern District of New York (July 30, 2024) — Complaint

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

SECURITIES AND EXCHANGE COMMISSION,

    Plaintiff,
 Case No. 24 Civ. 5738

ECF Case
v.

NADER AL-NAJI, JURY TRIAL DEMANDED

    Defendant,

and

BUSE DESTICIOĞLU AL-NAJI, JOUMANA
BAHOUTH AL-NAJI, INTANGIBLE
HOLDINGS, LLC, FIRESTORM MEDIA, LLC,
VIRIDIAN CITY, LLC, and DESO
FOUNDATION,

    Relief Defendants.
COMPLAINT

Plaintiff  Securities  and  Exchange  Commission  (“Commission”),  for  its  Complaint  against
Nader Al-Naji (“Al-Naji” or “Defendant”) and Buse Desticioğlu Al-Naji, Joumana Bahouth Al-Naji,
Intangible  Holdings,  LLC,  Firestorm  Media,  LLC,  Viridian  City,  LLC,  and  DeSo  Foundation
(collectively, “Relief Defendants”), alleges as follows:
SUMMARY
1. From at least November 2020 until the present, Defendant Al-Naji raised more than
$257 million by offering and selling crypto asset securities to investors while lying to them about
the supposedly “decentralized” nature of the project he was promoting and while illegally diverting

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millions of  investor  funds  into  luxury  purchases  to  enrich  himself,  his  close  relatives,  and  his
companies.
2. Al-Naji’s fraud revolved around a crypto asset called “BTCLT,” the native token
to BitClout, a blockchain-based platform Al-Naji also created.  Al-Naji offered and sold BTCLT
as a security, but never registered those offers and sales with the Commission,  although he was
required to do so under the federal securities laws.

3. From  the  beginning  and  continuing  through  the  BitClout platform’s March  2021
public launch and after, Al-Naji marketed BTCLT as an investment that would increase in value as
the BitClout platform grew—a means of generating a return by “betting on” the success of BitClout.
Al-Naji even likened BTCLT to “stock that allows you to own a piece of the platform.”

4. He  further  represented  that  anyone  could  buy  BTCLT  through  BitClout’s  built-in
“decentralized  exchange”  that  was  “available  on  the  ‘Buy  BitClout’  page”  on BitClout’s  website
where the price automatically “double[d] for every million” BTCLT sold, and that he expected the
asset to eventually be traded on third-party crypto asset trading platforms.

5. At the same time, in a deceptive attempt to avoid regulatory scrutiny, Al-Naji sought
to portray BitClout as a “decentralized” platform with “no company behind it ... just coins and code.”
For example, Al-Naji launched BitClout using the online pseudonym “Diamondhands,” attempting
to further the illusion that BTCLT was autonomous and had no one, identifiable issuer.
6. In reality, as Al-Naji knew or recklessly disregarded, he controlled the issuance of
BTCLT from the BitClout platform, including controlling which investors could obtain the crypto
asset security and at what price it was sold.  He also controlled the “treasury wallet” on the blockchain
that held the proceeds from the sales of BTCLT and used these proceeds as he desired and for his
own personal benefit, as further set forth herein.

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7. To facilitate the sales of BTCLT to investors, Al-Naji incorporated an entity, Relief
Defendant Intangible  Holdings,  LLC  (“IHL”).    IHL  entered  into  sales  contracts  for  BTCLT  with
investors, received funds from them, and custodied BTCLT for and/or transferred BTCLT to those
investors.    IHL  ultimately  transferred  the  proceeds  from  these  sales  to  BitClout’s  treasury  wallet
controlled by Al-Naji.
8. The BitClout platform  was  structured  such  that  investors  could buy BTCLT  using
bitcoin on  the  platform  but could  not  sell  BTCLT  for  bitcoin.    This  further allowed  Al-Naji  to
accumulate the bitcoin that investors poured into the platform in the treasury wallet that he controlled
and made it harder for BTCLT investors to cash out of their investment.
9. In total, the BitClout treasury wallet amassed more than $257 million in bitcoin from
investors from the beginning of Al-Naji’s unregistered offers and sales of BTCLT during the period
of November 2020 to the present.
10. Around the time of BitClout’s public launch in March 2021, Al-Naji explicitly and
publicly assured  investors—using his  Diamondhands  pseudonym—that  neither  he  nor  others
involved in the BitClout project would use funds in the treasury wallet to pay themselves any salaries
because,  instead, his  and  BitClout’s  employees’  financial  incentives  were  tied  to  the  success  of
BTCLT itself.
11. These  representations  were  false,  as  Al-Naji  knew  or  recklessly  disregarded.
Contrary to his assurances, Al-Naji used significant sums of money raised from investors to enrich
himself and others close to him.  This included the rental of a six-bedroom mansion in Beverly Hills,
payment of personal credit card bills, and extravagant gifts of cash (totaling at least $2.9 million) to
family  members,  including  Relief  Defendants  Buse  Desticioglu  Al-Naji  (his  wife)  and  Joumana

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Bahouth Al-Naji (his mother).  He also transferred investor funds to developers, programmers, and
promoters of the BitClout platform, contrary to his public statements.
12. By engaging in this conduct, as further described herein, Defendant Al-Naji violated
and, unless restrained and enjoined by the Court, may continue to violate Sections 5(a) and (c) and
17(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§ 77e(a), (c), q(a), and Section
10(b) of the Securities Exchange Action of 1934 (“Exchange Act”) 15 U.S.C. §78j(b),  and Rule 10b-
5 thereunder, 17 C.F.R. §240.10b-5.
JURISDICTION AND VENUE
13. This  Court  has  subject  matter  jurisdiction  over  this  action  pursuant  to  Securities
Act Sections 20(b) and 22(a), 15 U.S.C. §§ 77t(b) and 77v(a), and Exchange Act Sections 21(d),
21(e), and 27, 15 U.S.C. §§ 78u(d), 78u(e), and 78aa.  In connection with the conduct alleged in
this  Complaint,  Defendant,  directly  or  indirectly,  has  made  use  of  the  means  or  instruments  of
transportation  or  communication  in  interstate  commerce,  or  the  means  or  instrumentalities  of
interstate commerce, or of the mails, or of any facility of any national securities exchange.
14. Venue  is  proper  in  this  District  pursuant  to  Securities  Act  Section  22, 15  U.S.C.
§ 77v, and Exchange Act Section 27, 15 U.S.C. § 78aa.  Certain of the acts, practices, transactions,
and courses of business constituting the violations alleged in this Complaint occurred within this
District.   In  particular,  Defendant fraudulently offered  and  sold  BTCLT to  investors  within  this
District.
DEFENDANT
15. Nader Al-Naji, age 32, is a U.S. citizen who resides in Los Angeles, California.
He personally conceived of and created the BitClout blockchain protocol, which is now known as
the “DeSo” blockchain protocol.  Al-Naji also developed and created the BitClout platform and

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BTCLT.    He  solicited  investors  to  purchase  BTCLT  to  fund  the  development  of  the  BitClout
platform.    He  further made  public  misrepresentations  about  the  use  of,  and  misappropriated,
investors proceeds raised from the sale of BTCLT.  Al-Naji asserted his Fifth Amendment right
against  self-incrimination  concerning  the  subject  matter  of  this  Complaint  during  the  SEC’s
investigation into this matter.
RELIEF DEFENDANTS
16. Buse Desticioğlu Al-Naji, age 32, resides in Los Angeles.  She is Defendant Al-
Naji’s wife.  Upon information and belief, she received BitClout investor funds from Defendant
Al-Naji to which she had no entitlement.
17. Joumana Bahouth Al-Naji, age 68, resides in California.  She is Defendant Al-
Naji’s mother.  Upon information and belief, she received BitClout investor funds from Defendant
Al-Naji to which she had no entitlement.
18. IHL is  a  Delaware  limited  liability  company  established  on  July  6,  2020.
Defendant Al-Naji owns IHL and is its sole officer and director.  IHL maintained bank and crypto
asset trading platform accounts to which BitClout investor funds were directed and transferred.
19. Firestorm  Media,  LLC  is  a  Colorado  limited  liability  company  established  on
April 19, 2021.  Defendant Al-Naji owns Firestorm Media, LLC and is its sole officer and director.
Firestorm  Media,  LLC  maintained  a  bank  account  to  which  BitClout  investor  funds  were
transferred.
20. Viridian City, LLC is a New Mexico limited liability company established on June
7, 2021.  Defendant Al-Naji owns Viridian City, LLC and is its sole officer and director.  Viridian
City, LLC maintained a bank account to which BitClout investor funds were transferred.

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21. DeSo Foundation is a Delaware corporation established on August 27, 2021.  Al-
Naji owns DeSo Foundation and is its sole officer and director.  DeSo Foundation maintained a
bank account to which BitClout investor funds were transferred.
BACKGROUND ON SECURITIES OFFERINGS
22.  Congress enacted the Securities Act to regulate the offer and sale of securities.  In
contrast to commercial principles of caveat emptor (or buyer beware), Congress in the Securities
Act enacted a regime of full and fair disclosure, requiring those who offer and sell securities to the
investing public to provide sufficient, accurate information to allow investors to make informed
decisions before they invest.
23. Sections 5(a) and 5(c) of the Securities Act generally require an issuer of securities
to register an offering of securities through an effective registration statement before the securities
are offered and sold to the public.  See 15 U.S.C. §§ 77e(a) and (c).   Registration statements for a
securities offering provide public investors with, among other things, material information about
the issuer and the securities to be offered and sold.
24. Section 2(a)(1) of the Securities Act defines “security” to include a wide range of
investment vehicles, including an “investment contract.”  15 U.S.C. § 77b(a)(1).  An investment
contract, for purposes of the Securities Act, includes any “contract, transaction or scheme whereby
a person invests his money in a common enterprise and is led to expect profits” from the efforts of
others.  SEC v. W.J. Howey Co., 328 U.S. 293, 298-99 (1946).  This broad definition is “flexible”
and “capable of adaptation to meet the countless and variable schemes devised by those who seek
the use of the money of others on the promise of profits.”  Id. at 299.

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BACKGROUND ON CRYPTO ASSETS
25. As used herein, the terms “crypto asset,” “digital asset,” or “token” generally refer
to an asset issued and/or transferred using blockchain or distributed ledger technology, including
assets referred to colloquially as “cryptocurrencies,” “virtual currencies,” and digital “coins.”
26. A  blockchain  or  distributed  ledger  is  a  database  spread  across  a  network  of
computers  that  records  transactions  in  theoretically  unchangeable,  digitally  recorded  data
packages,  referred  to  as  “blocks.”    These  systems  typically  rely  on  cryptographic  techniques  to
secure recording of transactions.
27. A  blockchain  “protocol”  is  a  code,  software,  or  algorithm  that  governs  how  a
blockchain, or a feature of a blockchain, operates, including, among other things, the validation
mechanism used for the particular blockchain.
28. Crypto asset owners typically store the software providing them control over their
crypto assets on a piece of hardware or software called a crypto “wallet.”  Crypto wallets offer a
method  to  store  and  manage  critical  information  about  crypto  assets,  i.e.,  cryptographic
information necessary to identify and transfer those assets.  The primary purpose of a crypto wallet
is to store the “public key” and the “private key” associated with a crypto asset so that the user can
make transactions on the associated blockchain.  The public key is colloquially known as the user’s
blockchain  “address”  and  can  be  freely  shared  with  others.   The  private  key  is  analogous  to  a
password  and  confers  the  ability  to  transfer  a  crypto  asset.   Whoever  controls  the  private  key
typically controls the crypto asset associated with that key.
29. On  July  25,  2017,  the  SEC  issued  a Report  of  Investigation  Pursuant  to  Section
21(a)  of  the  Securities  Exchange  Act  of  1934:  The  DAO,  advising  “those  who  would  use  .  .  .
distributed  ledger  or  blockchain-enabled  means  for  capital  raising[]  to  take  appropriate  steps  to

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ensure compliance with the U.S. federal securities laws,” and finding that the offering of crypto
assets at issue in that report involved investment contracts and thus securities.
FACTUAL ALLEGATIONS
A. The BitCout Platform and BTCLT
30. In  2019,  Al-Naji  began  designing  BitClout,  a  web  and  application-based  social
media  platform  with  an  interface  that  promised  to  be  a  “new  type  of  social  network  that  mixes
speculation and social media.”
31. A  key  selling  point  for  BitClout was  that  like  X,  formerly  known  as  Twitter,
BitClout users could post content and “like” or share their own or other users’ content.
32. Al-Naji also claimed that BitClout would be “decentralized” and its content would
be stored and indexed on a blockchain, instead of being controlled by a single corporate entity or
person.  As such, the platform would purportedly be resistant to censorship.
33. BitClout’s “ White Paper” (   marketing materials that described the BitClout project)
touted BitClout as “like Bitcoin” because it was “a fully open-source project” with “no company
behind it – it’s just coins and code.”
34. The White Paper further explained that BTCLT would be the native token
1
 of the
BitClout project.
35. According  to  documents  prepared  by  Al-Naji  in  conjunction  with  the  BitClout
project, the price of BTCLT would automatically double for every million BTCLT sold directly
from the BitClout platform, with Al-Naji reserving two million BTCLT for himself as the project’s
founder.

1
 Some crypto assets are “native tokens” to a particular blockchain—meaning that they are
represented on their own blockchain and may be needed as part of the mechanism used to
confirm transactions on the blockchain.

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36. Al-Naji explained that purchasing BTCLT through the BitClout platform involved
a “totally decentralized” so-called “atomic swap” whereby investors would deposit the crypto asset
bitcoin into BitClout’s treasury wallet and receive BTCLT in exchange.
37. This  exchange,  however,  only  operated  in  one  direction,  meaning  that  BTCLT
investors could not exchange their tokens back into bitcoin or fiat currency (e.g., U.S. dollars) via
the BitClout platform.  This fact was not explained in the BitClout White Paper.
38. Al-Naji privately explained  to  an  early  investor  that  he  viewed  this  technical
limitation as a positive feature of the platform because restricting the ability to sell BTCLT had
the effect of driving up its price.
39. The BitClout platform  was  further billed  as  allowing  investors  to  speculate  by
creating an opportunity for them to monetize their social media profile and to invest in the profiles
of others through “Creator Coins.”
40. Creator  Coins  were  described  in  the  White  Paper  as  a  “new  type  of  asset  class”
whose value “is tied to the reputation of an individual” or their “standing in society.”
41. Every user on the platform was able to generate a Creator Coin by creating a profile.
In what Al-Naji later described as a “growth hack,” BitClout preloaded profiles for the “top 15,000
influencers from Twitter” onto the platform and had Creator Coins “minted,” or created, for them.
42. These  influencers  could  claim  their  “reserved”  profiles  by  posting  their  BitClout
public key address on Twitter, which would result in the influencers receiving a percentage of the
Creator  Coins  associated  with  their  profiles—ostensibly an  incentive  for  the  influencers to  join
and promote the platform.
43. Investors could buy (or sell) Creator Coins of any profile with BTCLT, regardless
of whether individuals associated with a profile sanctioned BitClout’s use of their identities.

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44. The White Paper described Creator Coins this way:
Creator  coins  are  a  new  type  of  asset  class  that  is  tied  to  the
reputation of an individual, rather than to a company or commodity.
They  are  truly  the  first  tool  we  have  as  a  society  to  trade “social
clout”  as  an  asset.  If  people  understand  this,  then  the  value  of
someone’s  coin  should  be  correlated  to  that  person’s  standing  in
society ... Thus, people who believe in someone’s potential can buy
their  coin  and  succeed  with  them  financially  when  that  person
realizes  their  potential.    And  traders  can  make  money buying  and
selling the ups and downs.
B. Al-Naji’s Offer and Sale of BTCLT to Investors
45. As  described  in  detail  below,  Defendant  offered  and  sold  BTCLT  tokens  as
investment contracts and, therefore, as securities.
46. BTCLT  purchasers  invested  money  and  reasonably  expected  profits  or  returns
derived from the entrepreneurial or managerial efforts of others, namely Al-Naji.   Purchasers of
BTCLT also invested into a common enterprise with other investors and with Al-Naji, who held a
significant percentage of all BTCLT in existence.  Moreover, because BTCLT tokens are fungible
with  each  other,  all  investors  shared  equally  in  price  increases—or  together  suffered  price
decreases—of BTCLT.
1. The Solicitation and Marketing of BTCLT to Select Investors
47. Starting in late 2020 and continuing through at least March 2021, Al-Naji solicited
investments to fund BitClout’s development by selling BTCLT to venture capital funds and other
prominent investors in the crypto asset community.
48. From the outset, continuing through the project’s public launch in March 2021, and
thereafter, Al-Naji marketed BTCLT as an investment into the potential success of the BitClout
platform—a crypto asset that would increase in value as the BitClout platform grew, or a means
of generating a return by “betting on” the success of BitClout.

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49. The fundamental investment thesis that Al-Naji marketed was that because BTCLT
would have to be “burned” (or used) anytime someone interacted (i.e., posted, liked, re-posted)
with  the  social  media  platform,  BTCLT  would  become  “more  scarce”  (to  use  Al-Naji’s
explanation in a podcast interview) and, therefore, more valuable as the BitClout platform became
more  popular.    In  that  interview,  Al-Naji  explained  that  this  mechanism  essentially  meant  that
investment returns “flow[] back to the holders of [BTCLT] via fees that are essentially burned.”
50. For  example,  Al-Naji  stressed  in  response  to  an  inquiry  from  an  investor  that
BitClout employees would hold BTCLT, such that the financial fortunes of those working on the
project were aligned with the financial fortunes of BTCLT investors, because everyone’s profits
would result from an increase in BTCLT’s value.
51. Al-Naji also pooled proceeds from the sale of BTCLT in the treasury wallet, which
were used, in part, to pay costs related to maintaining, developing, and marketing the platform.
52. BTCLT investors reasonably expected those profits to come from the managerial
and entrepreneurial efforts of its promoter, as Al-Naji invited them to do.  This objective reality is
confirmed by several early investors who stated they invested in BTCLT given Al-Naji’s “well-
known enough” reputation and his ability to develop the BitClout platform.
53. Similarly,  in November  2020, Al-Naji  explained  to  prospective  employees  and
early investors in a document entitled “State of the BitClout” that BTCLT was “simultaneously
the currency powering the platform and the stock that allows you to own a piece of the platform.
This  makes  it  so  that  everybody  who’s  using  the  platform,  especially  the  early  adopters,  get  to
share in the upside of the platform as it grows.”

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54. Moreover,  the  platform  that  Al-Naji  designed  automatically increased  BTCLT’s
price  with  every  token  sold  (doubling  for  every  million  sold)  guaranteeing  that  the  investment
opportunity would benefit early investors of the token.
55. Al-Naji  used  this  fact  to  advertise  the  profit  potential  for  buying  and  holding
BTCLT.  For example, on November 9, 2020, Al-Naji told an early investor that he:
expect[ed] we will get all the [venture capital] funds to be in before
the public launch which will push the price up quite a bit.  You can
see in the schedule if we raise even a few million from them, as we
expect  to  do,  the  protocol  price  will  easily  be  4-8x  what  it  is  now
(and could be much more if we decide to raise aggressively like we
did with [a different crypto asset project] before, which we are still
considering).   We  wanted  to  wait  to  talk  to  them  to  have  you
involved first for this reason— our most valuable partners should be
in at the ground floor
����
56. Despite the one-way setup described above that made it possible to buy—but not
sell—BTLCT  on  the  BitClout platform,  Al-Naji  nonetheless  assured  investors  that  he  always
intended to have BTCLT made available for trading (or “listed”) on crypto asset trading platforms
following BitClout’s public launch, so that those early investors could monetize their investments.
57. In addition, he touted that the investment arms of prominent crypto asset trading
platforms,  including  Coinbase,   Huobi,   and  Gemini,  were  also  early  investors  in  BitClout  and
would be incentivized to see BTCLT trading on their respective platforms.
58. For  example,  Al-Naji  told  an  early  investor  in  February  2021  that  “Huobi  and
Gemini seem like they’re eager to start the [listing] process with us but we think it’s best to wait
to do it until a couple months after the [BitClout] app is live.  That will make it so that people can
only buy [BTCLT on the BitClout platform], which will push the price up really high and set a
higher starting point for when we get listing.”

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59. At the same time, in keeping with Al-Naji’s goal to launch BitClout under the guise
of a decentralized project with “no company behind it ... just coins and code,” in March 2021 he
adopted the pseudonym “Diamondhands” in preparation for BitClout’s public launch.
60. As  Al-Naji had explained  to  an  early  investor  in  September  2020,  he  wanted  to
“launch  ‘well-known  enough’  that  people  in  the  industry  know  that  it’s  me  but  ‘anonymously
enough’ that the average person visiting the website (or the average regulator) won’t know without
having to do a ‘real investigation.’”
61. Al-Naji sought to precisely do just that, leveraging his connections and reputation
within  the  crypto  asset community  to  raise  substantial  funds  for  the  project  while  publicly
launching that project behind a pseudonym to hide his ownership and control from “average” users
and regulators.
62. Consistent with his attempt to portray BTCLT as being sold autonomously, without
an identifiable promoter, Al-Naji told investors in February 2021, in a document entitled “Supply
Curve Summary” that “the ‘counter-party’ for a typical [BTCLT] purchase is the blockchain itself,
and there is therefore no centralized issuer of the currency.”
2. Misleading Attempts to Avoid Regulatory Scrutiny
63. The  perception  that  there  was  no  issuer  of  BTCLT  was  also critical  to  Al-Naji’s
strategy of attempting to avoid regulatory scrutiny for his project.
64. Al-Naji understood that the test for whether something was offered or sold as an
“investment contract” was set out by the U.S. Supreme Court in Howey and he understood that the
SEC applied this test to determine if a crypto asset was being offered and sold as a security.
65. To one crypto asset industry participant and prospective investor, Al-Naji explained
his reasoning and attempts to avoid regulatory scrutiny as follows:

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My  impression  is  that  even  being  ‘fake’  decentralized  generally
confuses  regulators  and  deters  them  from  going  after  you.   In  the
case  of  the  SEC  it  gives  you  a  strong  argument  [with  respect  to]
Howey, but more broadly when you break the mold of ‘a company
with  money  in  a  bank,’  the  case  becomes  riskier  in  terms  of
litigation, which makes it less likely some career public servant will
make it their mission to take you down.
66. In  addition  to  attempting  to  use  the  facade  that  BitClout was not  controlled  by
anyone to avoid regulatory scrutiny, he also used it to procure a legal opinion that BitClout was
not engaged in a securities offering.
67. On March 18, 2021, around the time of BitClout’s public launch described below,
Al-Naji  obtained  an  opinion  letter  from  a  prominent  U.S.  law  firm  that concluded  that  BTCLT
sales were not likely to be deemed securities transactions under federal law.
68. The opinion relied extensively on Al-Naji’s description of the BitClout project and
its native token in which he falsely represented that (i) “no funds were raised or will be raised to
finance the development or upgrade of the [BitClout] Network,” (ii) there will be no “individual
or  corporate  entity”  that  “maintains  sole  control  over  the  Network,”  and  (iii)  BTCLT  would  be
marketed “solely for consumptive use” and that Al-Naji had not “and will not promote or support
listing or trading of [BTCLT] on any third-party trading firm,”  even though the opposite was true
in all respects.
69. Al-Naji shared that legal opinion with a number of early investors and crypto asset
trading platforms as part of a concerted effort shortly after BitClout’s public launch to list BTCLT
on those platforms, assuring them that his project was supposedly on solid legal footing.
70. The simple reality, however, was that Al-Naji controlled the issuance of BTCLT
and controlled BitClout.  He could select investors who could obtain BTCLT and when they could
do so; he controlled the so-called “autonomous” computer program that issued BTCLT from the
BitClout platform; he controlled the price at which BTCLT was issued; he maintained sole custody

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over the “treasury” wallet that held the bitcoin proceeds; and he was primarily responsible for the
design, development, and maintenance of the BitClout platform.
71. As Al-Naji explained, in November 2020, to one of his earliest prominent investors,
he “went ahead and hard-coded the price in the contract for you to $1 per [BTCLT], which I didn’t
do for anyone else.  It’s important to note that this the lowest price any non-angel will *ever get*
and significantly lower than the last several purchases we’ve processed.”
3.  Sales to Select Investors
72. Al-Naji  structured  two  purchase  rounds  for  venture  capital  investors  that  he
personally solicited.  During the first round, approximately 2 million BTCLT at $6 per token, were
sold via 39 separate contracts dated between January 28, 2021 and February 12, 2021.
73. The second round involved the sale of approximately 1 million BTCLT at $16 per
token that was sold via 31 contracts dated between January 29, 2021 and April 14, 2021.  Al-Naji,
directly or indirectly, entered into another dozen other contracts for the sale of BTCLT in 2020
and 2021 at different prices per token.
74. Al-Naji’s  ability  to  guarantee these  prices  in  particular  BTCLT  sales  further
demonstrate that he, rather than some autonomous mechanism, dictated the pricing and issuance
of BTCLT.
75. Purchasers of BTCLT through these contractual sales were not restricted in their
ability  to  resell  their  BTCLT  at  any  time  and  Al-Naji  failed  to  take  any  steps  to  verify  the
accreditation status of the investors.
76. In total, Al-Naji raised approximately $41 million from these contractual sales of
BTCLT.    Al-Naji  also  raised  approximately  $63  million  from  sales  of  BTCLT  on  the  BitClout
platform to other selected investors to whom he gave passwords which enabled them to purchase

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directly from the protocol, and whose accreditation status Al-Naji failed to verify.  The remaining
approximately $153 million of the $257 million amassed in BitClout’s treasury wallet was raised
via public sales of BTLCT to investors from the BitClout platform, as described below.
4. Public Sales of BTCLT
77. In  March  2021,  Al-Naji  began  selling  BTCLT  to  the  investing  public,  including
investors  in  the  United  Sates,  through  the  so-called  “public  launch”  of  BitClout.    Investors
purchased  BTCLT  directly  from  BitClout by  transferring  bitcoin  to  BitClout’s  treasury  wallet
using the BitClout platform.
78. As described above, one of the features of the BitClout platform was the ability to
purchase Creator Coins using BTCLT.  Creator Coins were billed as a crypto asset that would rise
and fall in value with the reputation of the person with whom a particular Creator Coin’s identity
was  associated.    In  other  words,  the  business  model  that  Al-Naji  touted  to  investors  was  that
BTCLT would be needed to purchase Creator Coins, which in turn permitted speculators to invest
in the value of a celebrity’s brand.  Thus, as Al-Naji promoted it, if BitClout was successful, more
people would want to buy Creator Coins, raising the demand and therefore the value and price of
BTCLT, such that BTCLT investors would profit.
79. BitClout executed a soft launch of its platform on or around March 12, 2021, when
Al-Naji began enabling the purchase of Creator Coins with BTCLT on the BitClout website via
passwords that Al-Naji sent to a select group of personal contacts.
80. As  before,  the  business  model  that  Al-Naji  touted  was  that  because  BTCLT  was
needed  to  speculate  on  Creator  Coins,  BTCLT  would  become  more  valuable  if  the  BitClout
platform  and  its  Creator  Coins  became  more  popular  based  upon  BitClout’s  efforts  to  entice
celebrities and others to join the BitClout platform in order to claim their Creator Coins.

17

81. Al-Naji  encouraged  these  contacts  (including  early  investors)  to  send  links  (and
passwords) for the BitClout website “to a few trusted people” who the contacts were “100% sure
aren’t going to leak it so they can buy BitClout ahead of the open and participate in the creator
coin launch.”  Al-Naji explained that his goal was to let that information leak organically so that
the BitClout platform and its website could scale up leading to a public launch.
82. However, BitClout links and passwords began to circulate on social media, which
according to Al-Naji in an email he sent to a public relations firm he had hired, was “against the
core team’s wishes since the platform was still too early for mainstream attention.”
83. After the platform’s launch, Al-Naji and his developers struggled to keep up with
demand  on  the  website  and  to  manually  curate  the  content  that  appeared  on  the  BitClout social
media feed.
84. Eventually,  between  late  March  and  early  April  2021,  Al-Naji  removed  the
password protection, enabling anyone to purchase BTCLT from the BitClout platform.
85. Subsequently, Al-Naji obtained BTCLT’s listings on several crypto asset trading
platforms, including Blockchain.com (June 15, 2021), AscendEX (July 15, 2021), and Coinbase
(December 13, 2021), and Huobi (now known as HTX) (June 26, 2023).
86. To  coincide  with  the  initial  listing,  in  early  June  2021  Al-Naji  sought  to  boost
BTCLT’s price by announcing publicly that he would be “turning off the ability the buy [BTCLT]
with Bitcoin” on the platform, thereby fixing the supply of BTCLT.
87. Al-Naji stated publicly that he reserved two million of the initial supply of BTCLT
for himself as the founder.  Accordingly, by choosing to limit the supply of BTCLT to 10.8 million,
Al-Naji ended up controlling approximately 19% of all BTCLT in existence.

18

88. In   a   post   on   BitClout’s social   media   feed   on   June   3,   2021,   Al-Naji,   as
Diamondhands, described the benefits of fixing the supply of BTCLT at this moment, which he
referred to as the “Deflation Bomb”:
In    preparation    for    BitClout’s    first    exchange    listing    [on
Blockchain.com],  I’m  thrilled  to  announce  the  most  deflationary
event in BitClout history.  [BTCLT]’s supply will be fixed forever
at  block  33,783  (Saturday  June  12th).   We  call  this  the  Deflation
Bomb ... Why  is  this  good?    An  asset’s  value  is  determined  by
supply and demand.  When supply stays fixed, higher demand has
more  impact.  This  means  every  new  user  who  joins  now  creates
value   for   all   existing   [BTCLT]   holders   rather   than   diluting
everyone.   No more  inflation.   [BTCLT]  is  also  burned  in  certain
transactions to reduce the supply even further.  For example, every
profile creation already burns [BTCLT], and we believe there will
be many more opportunities to burn [BTCLT] in the future.  With
these changes, [BTCLT] can now evolve from being just a currency
to  being  a  globally-recognized  store  of  value.    Where  Bitcoin  is
digital  gold  and  Ethereum  is  digital  oil,  [BTCLT]  can  now  finally
claim its seat at the table ... as digital $CLOUT.
89. Al-Naji  further  explained  to  an  investor  that  following  the  Deflation  Bomb,
purchases  of  BTCLT  on  BitClout would  be  directed  to  the  crypto  asset  trading  platform
:Blockchain.com “so they get a boost in users and so that price goes up when it lists.”
90. Al-Naji later disclosed to another investor in September 2021 that he had spent a
total of $15 million of BTCLT investor proceeds to purchase BTCLT on Blockchain.com.
91. Following BitClout’s  public  launch,  and  in  connection  with  BTCLT’s  listing  on
crypto asset trading platforms, Al-Naji continued to promote BitClout and BTCLT’s investment
potential.
92. Al-Naji, still maintaining anonymity, also used investor proceeds to engage public
relations firms to manage communications for the project, and compensated celebrities and social
media influencers to join and promote the platform.

19

93. Al-Naji also continued to make regular public statements concerning the platform
and value of BTCLT on BitClout itself.
94. For example, in a post from “Diamondhands” on BitClout’s social media feed in
connection  with  the  listing  of  BTCLT  on  Blockchain.com,   where  BTCLT  began  trading  at
approximately $175, Al-Naji wrote: “Today BitClout goes from being just an experiment to being
the  NYSE  of  creators.   To  celebrate,  I  thought  I’d  take  a  moment  to  tell  you  what  gets  me  so
excited about the future of BitClout ... And the best part?  We’re all so unbelievably early to this
phenomenon.  If    [Facebook] is worth $1 trillion, and if BitClout has all of these advantages, then
what should BitClout be worth?  Even at just $10 billion, the coin price is $10B/10.8M = ~$925”
95. In  another  Diamondhands  social  media  post  on  the BitClout platform on July  5,
2021, Al-Naji stated:
We’re all aligned by the fact that we hold [BTCLT], and [BTCLT]
appreciates  with  higher  transaction  volume.   The  more  devs  that
build  on  BitClout,  and  the  more  open  it  is,  the  more  we  all  make.
This  is  by  design ... There  is  no  separate  company  with  equity-
holders, and no room for misalignment here.  [BTCLT] appreciates
as txn volume increases, and transaction volume is maximized when
we  unleash  open,  decentralized  free  markets  ... And  we’re  all
aligned because doing this will maximize transaction volume, which
will maximize the value of [BTCLT].  The incentives are all set for
an explosion of innovation in social like we’ve never seen before.
And once it hits, we’ll wonder how we ever lived without it.

96. And, on September 9, 2021, following a downturn in the price of BTCLT, Al-Naji,
as Diamondhands, posted on the BitClout social media platform that users should not:
 “worry about the lull right now.  I’m not aware of a single crypto
project  that  didn’t  have  a  period  like  this,  including  Bitcoin  and
Ethereum.   Ethereum  in  particular  was  aggressively  labeled  as  a
scam when it launched.  All of this is natural, and I think we’ll come
out of this dip stronger than ever, with a base that better understands
the full potential of what we’re doing.  This is it: The moment when
the paper hands fold, and the true believers buy the dip.”

20

97. In total, Al-Naji sold at least $257 million of BTCLT to investors, including at least
$153 million during the public sale.
98. No registration statement was ever filed with the SEC or in effect with respect to,
and no exemption from registration was available for, any of the above offers and sales of BTCLT,
be it the private or public sales.  Thus, the offers and sales of BTCLT set forth above violated the
registration provisions of the federal securities laws.
C. Al-Naji Misrepresents the Use Of Investment Proceeds
99. As  described  above  and  further  below,  during  and  in  connection  with  the
unregistered offer and sale of BTCLT, Defendant intentionally or recklessly made materially false
and misleading statements to potential and actual BTCLT investors.
100. In addition, contrary to Defendant’s express representations to investors, Al-Naji
spent  significant  sums  of  investor  funds  on  expenses  that  were  entirely  unrelated  to  the
development of the BitClout platform.
101. As  noted,  Al-Naji  sought  to  create  the  illusion  of  supposed decentralization  and
autonomy to  the  investing  public  with  respect  to  BTCLT.    However,  the  falsity  of  these
statements—and Al-Naji’s understanding thereof—is demonstrated, for example, by the fact that
Al-Naji privately told select early investors in BitClout that he in fact controlled the investment
proceeds and, importantly, that he in fact was using the BitClout platform’s treasury wallet to fund
the project’s costs, including hiring developers and other employees.
102. But even these statements to private investors were materially false and misleading
and omitted material information, as Al-Naji knew or recklessly disregarded, because Al-Naji did
not disclose to these early investors that investors funds would be used to fund Al-Naji’s personal
expenses, including rental of a Beverly Hills mansion and payments to his family members.

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103. The foregoing information was material because a reasonable investor would have
considered such information, including information about who was behind the project and what
the funds would be used for, important to their investment decisions.
104. In general, even though Al-Naji was telling some select investors in private that Al-
Naji   controlled   the   investment   proceeds,   Al-Naji   generally   resisted   making   any   formal
commitments about the use of investment proceeds in writing and tried to publicly disclaim control
over the proceeds.
105. To further the illusion that he did not personally control investment proceeds, Al-
Naji engaged in other deceptive conduct and courses of conduct, including incorporating Relief
Defendant IHL to broker BTCLT sales by entering into contracts of sale for BTCLT with investor
counterparties, receiving funds from those counterparties, and custodying BTCLT on their behalf,
or transferring BTCLT to those investors.
106. When certain investors  suggested  an  amendment  to  the  purchase  and  custody
agreement  with  IHL  to  make  explicit  that  IHL  would  use  proceeds  from  their  investments  to
support the BitClout protocol, Al-Naji rejected the changes.
107. BitClout’s treasury wallet was maintained at a publicly identifiable address on the
Bitcoin blockchain.  Thus, at the time of BitClout’s public launch in March 2021, investors and
critics of the platform could see that the project’s treasury wallet contained a large bitcoin balance.
Some investors criticized the platform’s one-way mechanism, which only permitted BTCLT to be
purchased and not sold.
108. At  least  one  early  investor  who  understood  that  Al-Naji  was,  in  fact,  using
investment proceeds to compensate himself and his development team, urged him to be transparent
about his use of the proceeds and not keep the accumulated bitcoin for himself.

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109. Rather  than  heed  this  advice,  Al-Naji  made  additional  materially  false  and
misleading  statements  about BitClout’s  bitcoin  treasury wallet  in  a  press  interview  conducted
during the month of BitClout’s public launch in March 2021.
110. Specifically, in an interview with Decrypt published on March 26, 2021, Al-Naji,
speaking as his pseudonymous persona “Diamondhands,” falsely assured readers that “neither he
nor BitClout’s developers would use [the treasury wallet] to pay themselves, saying their financial
incentives  are  instead  tied  to  the  success  of  the  BTCLT  token—which  he  says  will  one  day  be
traded on exchanges, providing a way for its holders to cash out.”  In the interview, Diamondhands
explained  that  “BitClout’s  developers  will  soon  announce  plans  to  use  its  Bitcoin  stash  for
something ‘good.’”
111. The true picture of Al-Naji’s use of BitClout investment proceeds starkly differed
from  his  materially false  and  misleading  representations  to  investors  that  BitClout was  an
autonomous operation and his public statements that he would not use BitClout proceeds to enrich
himself or to pay other developers, as Al-Naji knew or recklessly disregarded.
112. In February 2021, Al-Naji also misrepresented to a prominent U.S. venture capital
firm,  which  was  negotiating  a  contract  with  Al-Naji  to  purchase  BTCLT  through  the  Al-Naji-
controlled entity IHL, that IHL “is merely purchasing [BTCLT] from the protocol, and it does not
have any control over the funds after this purchase is complete.”   This representation was false, as
Al-Naji,  through  IHL, did  control  funds  used  to  purchase  BTCLT  and  this  information  was
material because a reasonable investor would have considered such information important to their
investment decisions.

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113. After incorporating IHL in July 2020, Al-Naji opened a bank account and crypto
asset  over  the  counter  (“OTC”)  trading  account  in  IHL’s  name  in  December  2020  and  January
2021, respectively.
114. Al-Naji  represented  to  the  bank  that  IHL  was  a  “software  developer”  that  was
developing BitClout—not a broker or trader as he had represented to investors.
115. Al-Naji had many early investors deposit fiat currency (e.g., U.S. dollars) into the
IHL bank account.  He then transferred those funds to the IHL crypto asset OTC account to convert
the fiat currency to bitcoin, and then transferred that bitcoin to the BitClout treasury wallet in return
for BTCLT.
116. In total, the BitClout treasury wallet amassed more than 4,984 bitcoin (valued at
over $257 million) from investors, of which Al-Naji has withdrawn 2,458 bitcoin (valued at over
$78 million) ) including by sending some of it back to the same crypto asset and bank accounts in
the name of IHL, and subsequently on to a brokerage account in his own name.
117. Al-Naji  used  significant  sums  from  investors  to  enrich  himself  and  his  family
members and to compensate those affiliated with the BitClout project.
118. Among  other  expenditures,  Al-Naji  used  investor  funds  to:  pay  his  own  living
expenses, including the rental of a six-bedroom mansion in Beverly Hills and personal credit card
payments; fund extravagant gifts of cash (of at least $1 million each) to his wife, Relief Defendant
Buse Desticioğlu Al-Naji,  and  his  mother  Relief  Defendant  Joumana  Bahouth  Al-Naji;  transfer
funds  to  accounts  in  the  names  of  his  wholly-owned  entities,  including  Relief  Defendants  IHL,
Firestorm  Media  LLC,  Viridian  City,  LLC,  and  DeSo  Foundation;  and  to  fund  personal
investments in other crypto asset projects.

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119. In  addition  to  personally  enriching  himself  and  his  relatives,  Al-Naji  transferred
investor  funds  to  BitClout developers,  programmers,  and  promoters,  contrary  to  his  public
statements that he had not and would not use investor proceeds to compensate himself or members
of BitClout’s development team.
120. In  fact,  to  pay  certain  members  of  that  development  team  in  BTCLT,  Al-Naji
transferred investor funds from the BitClout treasury wallet to those individuals and then had them
purchase BTCLT by sending the bitcoin back to the treasury wallet.
121. This round-trip transaction had the effect of recycling funds through the treasury
wallet and, because new BTCLT was created as a result, artificially raising the price at which the
platform sold BTCLT to other investors thereafter.
122. In  September  2021,  Al-Naji decided  to  rebrand  the  entire  BitClout project  to
“DeSo”  (short  for  “Decentralized  Social”).    In  connection  with  the  relaunch,  Al-Naji  publicly
revealed himself to have been Diamondhands, which had essentially been an open secret.  Al-Naji
created the DeSo Foundation as part of the rebrand to support the newly-named DeSo platform,
and claimed to have capitalized it with $200 million (the remaining amount of capital raised from
the initial sale of BTCLT to early investors).
FIRST CLAIM FOR RELIEF
Violations of Securities Act Section 17(a)
(Against Defendant Al-Naji)

123. The Commission realleges and reincorporates paragraphs 1 through 122 as if fully
set forth herein.
124. Defendant,   directly   or   indirectly,   by   use   of   means   of   instrumentalities   of
transportation or communication in interstate commerce or by use of the mails, in the offer or sale
of securities: (a) knowingly or recklessly employed devices, schemes or artifices to defraud; (b)

25

knowingly, recklessly, or negligently obtained money or property by means of untrue statements
of material fact, or have omitted to state material facts necessary in order to make the statements
made,  in  light  of  the  circumstances  under  which  they  were  made,  not  misleading;  and  (c)
knowingly,  recklessly,  or  negligently  engaged  in  transactions,  practices,  or  courses  of  business
which  operated  or  would  operate  as  a  fraud  or  deceit  upon  the  purchasers  of  securities.    In
connection with the offer and sale of BTCLT, Defendant made material misrepresentations of fact
and engaged in other deceptive conduct, including but not limited to material misrepresentations
regarding the use of investor proceeds for Defendant’s own personal benefit.
125. By reason of the actions alleged herein, Defendants violated and unless enjoined
will continue to violate Securities Act Section 17(a), 15 U.S.C. § 77q(a).
SECOND CLAIM FOR RELIEF
Violations of Exchange Act Section 10(b) and Rule 10b-5 Thereunder
(Against Defendant Al-Naji)

126. The Commission realleges and reincorporates paragraphs 1 through 122 as if fully
set forth herein.
127. By  reason  of  the  conduct  described  above,  Defendant,  in  connection  with  the
purchase or sale of securities, by the use of the means or instrumentalities of interstate commerce
or  of  the  mails,  or  of  any  facility  of  any  national  securities  exchange,  directly  or  indirectly,
knowingly or recklessly (1) employed devices, schemes, or artifices to defraud and/or (2) made
untrue statements of material facts or omitted to state material facts necessary in order to make the
statements made, in light of the circumstances under which they were made, not misleading and/or
(3) engaged in acts, practices, or courses of business which operates or would operate as a fraud
or deceit upon any persons, including purchasers or sellers of the securities.  In connection with
the offer and sale of BTCLT, Defendant made material misrepresentations of fact and engaged in

26

other deceptive conduct, including but not limited to material misrepresentations regarding the use
of investor proceeds for Defendant’s own personal benefit.
128. By reason of the actions alleged herein, Defendant violated and unless enjoined will
continue to violate Exchange Act Section 10(b), 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder,
17 C.F.R. § 240.10b-5(a) and (c).
THIRD CLAIM FOR RELIEF
Violations of Securities Act Section 5(a) and (c)
(Against Defendant Al-Naji)

129. The Commission realleges and reincorporated paragraphs 1 through 122 as if fully
set forth herein.
130. By engaging in conduct alleged above, Defendant, directly or indirectly, through
use of the means or instruments of transportation or communication in interstate commerce, or of
the mails, offered to sell or sold securities, or carried or caused such securities to be carried through
the mails or in interstate commerce for the purpose of sale or for delivery after sale.  Defendant
created, drafted, edited, and approved promotional materials for BTCLT, and made statements to
induce investors to purchase these securities.  Defendant directly or indirectly received proceeds
from the sale of these securities.
131. No  registration  statement  was  filed  with  the  Commission  or  was  in  effect  with
respect to the securities offered by Defendant prior to the offer or sale of these securities.
132. By  engaging  in  the  foregoing  misconduct,  Defendant  has   violated,  and  unless
enjoined will continue to violate, Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C. §§ 77e(a)
and 77e(c).

27

FOURTH CLAIM FOR RELIEF
Unjust Enrichment
(Against All Relief Defendants)

133. The  Commission  re-alleges  and  incorporates  by  reference  here  the  allegations  in
paragraphs 1 through 122.
134.  Relief  Defendant Buse Desticioğlu Al-Naji  received  at  least  $1.46 million  in
BTCLT investor funds.  Relief Defendant Buse Desticioğlu Al-Naji had no legitimate claim to the
funds  she received. Relief  Defendant  Buse  Desticioğlu  Al-Naji  obtained  the  funds  under
circumstances  in  which  it  is  not  just,  equitable,  or  conscionable  for  her  to  retain  the  funds,  and
therefore was unjustly enriched.
135. Relief Defendant Joumana Bahouth Al-Naji received at least $1 million in BTCLT
investor funds.  Relief Defendant Joumana Bahouth Al-Naji had no legitimate claim to the funds
she received.   Relief Defendant Joumana Bahouth Al-Naji obtained the funds under circumstances
in  which  it  is  not  just,  equitable,  or  conscionable  for  her  to  retain  the  funds,  and  therefore  was
unjustly enriched.
136. Relief  Defendants   IHL,  Firestorm  Media,  LLC,  Viridian  City,  LLC,  and  DeSo
Foundation are  corporate  entities  created  and  controlled  by  Al-Naji  and  to  which  he  transferred
BTCLT investor proceeds.  IHL, Firestorm Media, LLC, Viridian City, LLC, and DeSo Foundation
had no legitimate claim to the funds they received.  Relief Defendants IHL, Firestorm Media, LLC,
Viridian City, LLC, and DeSo Foundation obtained the funds under circumstances in which it is
not just, equitable, or conscionable for them to retain the funds, and therefore they were unjustly
enriched.

28

PRAYER FOR RELIEF
WHEREFORE, the Commission respectfully requests that the Court enter a judgment:
(a) finding that Al-Naji violated the antifraud and registration provisions of the federal
securities laws as alleged herein;
(b) permanently  enjoining  Al-Naji  from  violating  Securities  Act  Sections  5(a),  5(c),
and  17(a),  15  U.S.C.  §§  77e(a),  77e(c),  77q(a);  and Exchange  Act  Section  10(b),  15  U.S.C.
§ 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5;
(c) imposing  an  injunction  pursuant  to  Exchange  Act  Section  21(d)(5),  15  U.S.C.
§ 78u(d)(5), permanently  enjoining  Al-Naji from  participating,  directly  or  indirectly,  including,
but not limited to, through any entity controlled by him, in any offer or sale of securities, including
any crypto asset security; provided, however, that such injunction shall not prevent Al-Naji from
purchasing or selling securities, including any crypto asset security, for his own personal account;
(d) ordering Al-Naji and  Relief  Defendants  Buse  Desticioğlu  Al-Naji,  Joumana
Bahouth  Al-Naji,  IHL,  Firestorm  Media,  LLC,  Viridian  City,  LLC,  and  DeSo  Foundation  to
disgorge all ill-gotten gains, plus prejudgment interest thereon, wrongfully obtained as a result of
Al-Naji’s  illegal  conduct,  pursuant  to  Exchange  Act  Sections  21(d)(3),  (5)  and  (7),  15  U.S.C.
§§ 78u(d)(3), (5) and (7);
(e) ordering Al-Naji to pay civil penalties pursuant to Securities Act Section 20(d), 15
U.S.C. § 77t(d), and Exchange Act Section 21(d), 15 U.S.C. § 78u(d);
(f) permanently barring Al-Naji pursuant to Exchange Act Section 21(d)(2), 15 U.S.C.
§  78u(d)(2),  and  Securities  Act  Section  20(e),  15  U.S.C.  §  77t(e),  from  acting  as  an  officer  or
director of any issuer that has a class of securities registered pursuant to Exchange Act Section 12,
15  U.S.C.  §  78l,  or  that  is  required  to  file  reports  pursuant  to  Exchange  Act  Section  15(d),  15

29

U.S.C. § 78o(d); and
(g) granting such other relief to the Commission as the Court may deem just and proper.
Dated: July 30, 2024
Respectfully submitted,

SECURITIES AND EXCHANGE
COMMISSION

 /s/ Christopher J. Carney
Christopher J. Carney
Geoffrey Gettinger (pro hac vice application
 to be submitted)
U.S.  Securities  and  Exchange  Commission
100 F Street, N.E.
Washington, DC 20549
Tel: (202) 551-2379 (Carney)
[email protected]

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF NEW YORK 
 
 
  
SECURITIES AND EXCHANGE COMMISSION,  
  
    Plaintiff,  
 Case No. 24 Civ. 5738     

 
ECF Case 

v.  
  
NADER AL-NAJI, JURY TRIAL DEMANDED 
  
    Defendant, 
 
and 
 
BUSE DESTICIOĞLU AL-NAJI, JOUMANA 
BAHOUTH AL-NAJI, INTANGIBLE 
HOLDINGS, LLC, FIRESTORM MEDIA, LLC, 
VIRIDIAN CITY, LLC, and DESO 
FOUNDATION, 
 
    Relief Defendants. 

COMPLAINT 

  
 
Plaintiff Securities and Exchange Commission (“Commission”), for its Complaint against 

Nader Al-Naji (“Al-Naji” or “Defendant”) and Buse Desticioğlu Al-Naji, Joumana Bahouth Al-Naji, 

Intangible Holdings, LLC, Firestorm Media, LLC, Viridian City, LLC, and DeSo Foundation 

(collectively, “Relief Defendants”), alleges as follows: 

SUMMARY 

1. From at least November 2020 until the present, Defendant Al-Naji raised more than 

$257 million by offering and selling crypto asset securities to investors while lying to them about 

the supposedly “decentralized” nature of the project he was promoting and while illegally diverting 

Case 1:24-cv-05738     Document 1     Filed 07/30/24     Page 1 of 29



2 
 

millions of investor funds into luxury purchases to enrich himself, his close relatives, and his 

companies. 

2. Al-Naji’s fraud revolved around a crypto asset called “BTCLT,” the native token 

to BitClout, a blockchain-based platform Al-Naji also created.  Al-Naji offered and sold BTCLT 

as a security, but never registered those offers and sales with the Commission, although he was 

required to do so under the federal securities laws.   

3. From the beginning and continuing through the BitClout platform’s March 2021 

public launch and after, Al-Naji marketed BTCLT as an investment that would increase in value as 

the BitClout platform grew—a means of generating a return by “betting on” the success of BitClout.  

Al-Naji even likened BTCLT to “stock that allows you to own a piece of the platform.”   

4. He further represented that anyone could buy BTCLT through BitClout’s built-in 

“decentralized exchange” that was “available on the ‘Buy BitClout’ page” on BitClout’s website 

where the price automatically “double[d] for every million” BTCLT sold, and that he expected the 

asset to eventually be traded on third-party crypto asset trading platforms. 

5. At the same time, in a deceptive attempt to avoid regulatory scrutiny, Al-Naji sought 

to portray BitClout as a “decentralized” platform with “no company behind it … just coins and code.”  

For example, Al-Naji launched BitClout using the online pseudonym “Diamondhands,” attempting 

to further the illusion that BTCLT was autonomous and had no one, identifiable issuer.   

6. In reality, as Al-Naji knew or recklessly disregarded, he controlled the issuance of 

BTCLT from the BitClout platform, including controlling which investors could obtain the crypto 

asset security and at what price it was sold.  He also controlled the “treasury wallet” on the blockchain 

that held the proceeds from the sales of BTCLT and used these proceeds as he desired and for his 

own personal benefit, as further set forth herein.   

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7. To facilitate the sales of BTCLT to investors, Al-Naji incorporated an entity, Relief 

Defendant Intangible Holdings, LLC (“IHL”).  IHL entered into sales contracts for BTCLT with 

investors, received funds from them, and custodied BTCLT for and/or transferred BTCLT to those 

investors.  IHL ultimately transferred the proceeds from these sales to BitClout’s treasury wallet 

controlled by Al-Naji. 

8. The BitClout platform was structured such that investors could buy BTCLT using 

bitcoin on the platform but could not sell BTCLT for bitcoin.  This further allowed Al-Naji to 

accumulate the bitcoin that investors poured into the platform in the treasury wallet that he controlled 

and made it harder for BTCLT investors to cash out of their investment. 

9. In total, the BitClout treasury wallet amassed more than $257 million in bitcoin from 

investors from the beginning of Al-Naji’s unregistered offers and sales of BTCLT during the period 

of November 2020 to the present. 

10. Around the time of BitClout’s public launch in March 2021, Al-Naji explicitly and 

publicly assured investors—using his Diamondhands pseudonym—that neither he nor others 

involved in the BitClout project would use funds in the treasury wallet to pay themselves any salaries 

because, instead, his and BitClout’s employees’ financial incentives were tied to the success of 

BTCLT itself.   

11. These representations were false, as Al-Naji knew or recklessly disregarded.  

Contrary to his assurances, Al-Naji used significant sums of money raised from investors to enrich 

himself and others close to him.  This included the rental of a six-bedroom mansion in Beverly Hills, 

payment of personal credit card bills, and extravagant gifts of cash (totaling at least $2.9 million) to 

family members, including Relief Defendants Buse Desticioglu Al-Naji (his wife) and Joumana 

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Bahouth Al-Naji (his mother).  He also transferred investor funds to developers, programmers, and 

promoters of the BitClout platform, contrary to his public statements. 

12. By engaging in this conduct, as further described herein, Defendant Al-Naji violated 

and, unless restrained and enjoined by the Court, may continue to violate Sections 5(a) and (c) and 

17(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§ 77e(a), (c), q(a), and Section 

10(b) of the Securities Exchange Action of 1934 (“Exchange Act”) 15 U.S.C. §78j(b), and Rule 10b-

5 thereunder, 17 C.F.R. §240.10b-5.  

JURISDICTION AND VENUE 

13. This Court has subject matter jurisdiction over this action pursuant to Securities 

Act Sections 20(b) and 22(a), 15 U.S.C. §§ 77t(b) and 77v(a), and Exchange Act Sections 21(d), 

21(e), and 27, 15 U.S.C. §§ 78u(d), 78u(e), and 78aa.  In connection with the conduct alleged in 

this Complaint, Defendant, directly or indirectly, has made use of the means or instruments of 

transportation or communication in interstate commerce, or the means or instrumentalities of 

interstate commerce, or of the mails, or of any facility of any national securities exchange. 

14. Venue is proper in this District pursuant to Securities Act Section 22, 15 U.S.C. 

§ 77v, and Exchange Act Section 27, 15 U.S.C. § 78aa.  Certain of the acts, practices, transactions, 

and courses of business constituting the violations alleged in this Complaint occurred within this 

District.  In particular, Defendant fraudulently offered and sold BTCLT to investors within this 

District. 

DEFENDANT  

15. Nader Al-Naji, age 32, is a U.S. citizen who resides in Los Angeles, California.  

He personally conceived of and created the BitClout blockchain protocol, which is now known as 

the “DeSo” blockchain protocol.  Al-Naji also developed and created the BitClout platform and 

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BTCLT.  He solicited investors to purchase BTCLT to fund the development of the BitClout 

platform.  He further made public misrepresentations about the use of, and misappropriated, 

investors proceeds raised from the sale of BTCLT.  Al-Naji asserted his Fifth Amendment right 

against self-incrimination concerning the subject matter of this Complaint during the SEC’s 

investigation into this matter. 

RELIEF DEFENDANTS 

16. Buse Desticioğlu Al-Naji, age 32, resides in Los Angeles.  She is Defendant Al-

Naji’s wife.  Upon information and belief, she received BitClout investor funds from Defendant 

Al-Naji to which she had no entitlement. 

17. Joumana Bahouth Al-Naji, age 68, resides in California.  She is Defendant Al-

Naji’s mother.  Upon information and belief, she received BitClout investor funds from Defendant 

Al-Naji to which she had no entitlement. 

18. IHL is a Delaware limited liability company established on July 6, 2020.  

Defendant Al-Naji owns IHL and is its sole officer and director.  IHL maintained bank and crypto 

asset trading platform accounts to which BitClout investor funds were directed and transferred. 

19. Firestorm Media, LLC is a Colorado limited liability company established on 

April 19, 2021.  Defendant Al-Naji owns Firestorm Media, LLC and is its sole officer and director.  

Firestorm Media, LLC maintained a bank account to which BitClout investor funds were 

transferred. 

20. Viridian City, LLC is a New Mexico limited liability company established on June 

7, 2021.  Defendant Al-Naji owns Viridian City, LLC and is its sole officer and director.  Viridian 

City, LLC maintained a bank account to which BitClout investor funds were transferred.   

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21. DeSo Foundation is a Delaware corporation established on August 27, 2021.  Al-

Naji owns DeSo Foundation and is its sole officer and director.  DeSo Foundation maintained a 

bank account to which BitClout investor funds were transferred. 

BACKGROUND ON SECURITIES OFFERINGS 

22.  Congress enacted the Securities Act to regulate the offer and sale of securities.  In 

contrast to commercial principles of caveat emptor (or buyer beware), Congress in the Securities 

Act enacted a regime of full and fair disclosure, requiring those who offer and sell securities to the 

investing public to provide sufficient, accurate information to allow investors to make informed 

decisions before they invest.  

23. Sections 5(a) and 5(c) of the Securities Act generally require an issuer of securities 

to register an offering of securities through an effective registration statement before the securities 

are offered and sold to the public.  See 15 U.S.C. §§ 77e(a) and (c).  Registration statements for a 

securities offering provide public investors with, among other things, material information about 

the issuer and the securities to be offered and sold. 

24. Section 2(a)(1) of the Securities Act defines “security” to include a wide range of 

investment vehicles, including an “investment contract.”  15 U.S.C. § 77b(a)(1).  An investment 

contract, for purposes of the Securities Act, includes any “contract, transaction or scheme whereby 

a person invests his money in a common enterprise and is led to expect profits” from the efforts of 

others.  SEC v. W.J. Howey Co., 328 U.S. 293, 298-99 (1946).  This broad definition is “flexible” 

and “capable of adaptation to meet the countless and variable schemes devised by those who seek 

the use of the money of others on the promise of profits.”  Id. at 299.  

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BACKGROUND ON CRYPTO ASSETS 

25. As used herein, the terms “crypto asset,” “digital asset,” or “token” generally refer 

to an asset issued and/or transferred using blockchain or distributed ledger technology, including 

assets referred to colloquially as “cryptocurrencies,” “virtual currencies,” and digital “coins.”  

26. A blockchain or distributed ledger is a database spread across a network of 

computers that records transactions in theoretically unchangeable, digitally recorded data 

packages, referred to as “blocks.”  These systems typically rely on cryptographic techniques to 

secure recording of transactions.  

27. A blockchain “protocol” is a code, software, or algorithm that governs how a 

blockchain, or a feature of a blockchain, operates, including, among other things, the validation 

mechanism used for the particular blockchain. 

28. Crypto asset owners typically store the software providing them control over their 

crypto assets on a piece of hardware or software called a crypto “wallet.”  Crypto wallets offer a 

method to store and manage critical information about crypto assets, i.e., cryptographic 

information necessary to identify and transfer those assets.  The primary purpose of a crypto wallet 

is to store the “public key” and the “private key” associated with a crypto asset so that the user can 

make transactions on the associated blockchain.  The public key is colloquially known as the user’s 

blockchain “address” and can be freely shared with others.  The private key is analogous to a 

password and confers the ability to transfer a crypto asset.  Whoever controls the private key 

typically controls the crypto asset associated with that key. 

29. On July 25, 2017, the SEC issued a Report of Investigation Pursuant to Section 

21(a) of the Securities Exchange Act of 1934: The DAO, advising “those who would use . . . 

distributed ledger or blockchain-enabled means for capital raising[] to take appropriate steps to 

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ensure compliance with the U.S. federal securities laws,” and finding that the offering of crypto 

assets at issue in that report involved investment contracts and thus securities. 

FACTUAL ALLEGATIONS 

A. The BitCout Platform and BTCLT 

30. In 2019, Al-Naji began designing BitClout, a web and application-based social 

media platform with an interface that promised to be a “new type of social network that mixes 

speculation and social media.”   

31. A key selling point for BitClout was that like X, formerly known as Twitter, 

BitClout users could post content and “like” or share their own or other users’ content.   

32. Al-Naji also claimed that BitClout would be “decentralized” and its content would 

be stored and indexed on a blockchain, instead of being controlled by a single corporate entity or 

person.  As such, the platform would purportedly be resistant to censorship. 

33. BitClout’s “White Paper” (marketing materials that described the BitClout project) 

touted BitClout as “like Bitcoin” because it was “a fully open-source project” with “no company 

behind it – it’s just coins and code.”   

34. The White Paper further explained that BTCLT would be the native token1 of the 

BitClout project.   

35. According to documents prepared by Al-Naji in conjunction with the BitClout 

project, the price of BTCLT would automatically double for every million BTCLT sold directly 

from the BitClout platform, with Al-Naji reserving two million BTCLT for himself as the project’s 

founder. 

 
1 Some crypto assets are “native tokens” to a particular blockchain—meaning that they are 
represented on their own blockchain and may be needed as part of the mechanism used to 
confirm transactions on the blockchain. 

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36. Al-Naji explained that purchasing BTCLT through the BitClout platform involved 

a “totally decentralized” so-called “atomic swap” whereby investors would deposit the crypto asset 

bitcoin into BitClout’s treasury wallet and receive BTCLT in exchange.   

37. This exchange, however, only operated in one direction, meaning that BTCLT 

investors could not exchange their tokens back into bitcoin or fiat currency (e.g., U.S. dollars) via 

the BitClout platform.  This fact was not explained in the BitClout White Paper.   

38. Al-Naji privately explained to an early investor that he viewed this technical 

limitation as a positive feature of the platform because restricting the ability to sell BTCLT had 

the effect of driving up its price. 

39. The BitClout platform was further billed as allowing investors to speculate by 

creating an opportunity for them to monetize their social media profile and to invest in the profiles 

of others through “Creator Coins.”   

40. Creator Coins were described in the White Paper as a “new type of asset class” 

whose value “is tied to the reputation of an individual” or their “standing in society.” 

41. Every user on the platform was able to generate a Creator Coin by creating a profile.  

In what Al-Naji later described as a “growth hack,” BitClout preloaded profiles for the “top 15,000 

influencers from Twitter” onto the platform and had Creator Coins “minted,” or created, for them.   

42. These influencers could claim their “reserved” profiles by posting their BitClout 

public key address on Twitter, which would result in the influencers receiving a percentage of the 

Creator Coins associated with their profiles—ostensibly an incentive for the influencers to join 

and promote the platform.   

43. Investors could buy (or sell) Creator Coins of any profile with BTCLT, regardless 

of whether individuals associated with a profile sanctioned BitClout’s use of their identities.   

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44. The White Paper described Creator Coins this way: 

Creator coins are a new type of asset class that is tied to the 
reputation of an individual, rather than to a company or commodity. 
They are truly the first tool we have as a society to trade “social 
clout” as an asset. If people understand this, then the value of 
someone’s coin should be correlated to that person’s standing in 
society … Thus, people who believe in someone’s potential can buy 
their coin and succeed with them financially when that person 
realizes their potential.  And traders can make money buying and 
selling the ups and downs. 

B. Al-Naji’s Offer and Sale of BTCLT to Investors  

45. As described in detail below, Defendant offered and sold BTCLT tokens as 

investment contracts and, therefore, as securities.   

46. BTCLT purchasers invested money and reasonably expected profits or returns 

derived from the entrepreneurial or managerial efforts of others, namely Al-Naji.  Purchasers of 

BTCLT also invested into a common enterprise with other investors and with Al-Naji, who held a 

significant percentage of all BTCLT in existence.  Moreover, because BTCLT tokens are fungible 

with each other, all investors shared equally in price increases—or together suffered price 

decreases—of BTCLT. 

1. The Solicitation and Marketing of BTCLT to Select Investors 

47. Starting in late 2020 and continuing through at least March 2021, Al-Naji solicited 

investments to fund BitClout’s development by selling BTCLT to venture capital funds and other 

prominent investors in the crypto asset community. 

48. From the outset, continuing through the project’s public launch in March 2021, and 

thereafter, Al-Naji marketed BTCLT as an investment into the potential success of the BitClout 

platform—a crypto asset that would increase in value as the BitClout platform grew, or a means 

of generating a return by “betting on” the success of BitClout.   

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49. The fundamental investment thesis that Al-Naji marketed was that because BTCLT 

would have to be “burned” (or used) anytime someone interacted (i.e., posted, liked, re-posted) 

with the social media platform, BTCLT would become “more scarce” (to use Al-Naji’s 

explanation in a podcast interview) and, therefore, more valuable as the BitClout platform became 

more popular.  In that interview, Al-Naji explained that this mechanism essentially meant that 

investment returns “flow[] back to the holders of [BTCLT] via fees that are essentially burned.” 

50. For example, Al-Naji stressed in response to an inquiry from an investor that 

BitClout employees would hold BTCLT, such that the financial fortunes of those working on the 

project were aligned with the financial fortunes of BTCLT investors, because everyone’s profits 

would result from an increase in BTCLT’s value.   

51. Al-Naji also pooled proceeds from the sale of BTCLT in the treasury wallet, which 

were used, in part, to pay costs related to maintaining, developing, and marketing the platform. 

52. BTCLT investors reasonably expected those profits to come from the managerial 

and entrepreneurial efforts of its promoter, as Al-Naji invited them to do.  This objective reality is 

confirmed by several early investors who stated they invested in BTCLT given Al-Naji’s “well-

known enough” reputation and his ability to develop the BitClout platform. 

53. Similarly, in November 2020, Al-Naji explained to prospective employees and 

early investors in a document entitled “State of the BitClout” that BTCLT was “simultaneously 

the currency powering the platform and the stock that allows you to own a piece of the platform.  

This makes it so that everybody who’s using the platform, especially the early adopters, get to 

share in the upside of the platform as it grows.”   

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54. Moreover, the platform that Al-Naji designed automatically increased BTCLT’s 

price with every token sold (doubling for every million sold) guaranteeing that the investment 

opportunity would benefit early investors of the token.   

55. Al-Naji used this fact to advertise the profit potential for buying and holding 

BTCLT.  For example, on November 9, 2020, Al-Naji told an early investor that he: 

expect[ed] we will get all the [venture capital] funds to be in before 
the public launch which will push the price up quite a bit.  You can 
see in the schedule if we raise even a few million from them, as we 
expect to do, the protocol price will easily be 4-8x what it is now 
(and could be much more if we decide to raise aggressively like we 
did with [a different crypto asset project] before, which we are still 
considering).  We wanted to wait to talk to them to have you 
involved first for this reason— our most valuable partners should be 
in at the ground floor 
���� 

56. Despite the one-way setup described above that made it possible to buy—but not 

sell—BTLCT on the BitClout platform, Al-Naji nonetheless assured investors that he always 

intended to have BTCLT made available for trading (or “listed”) on crypto asset trading platforms 

following BitClout’s public launch, so that those early investors could monetize their investments.   

57. In addition, he touted that the investment arms of prominent crypto asset trading 

platforms, including Coinbase, Huobi, and Gemini, were also early investors in BitClout and 

would be incentivized to see BTCLT trading on their respective platforms.   

58. For example, Al-Naji told an early investor in February 2021 that “Huobi and 

Gemini seem like they’re eager to start the [listing] process with us but we think it’s best to wait 

to do it until a couple months after the [BitClout] app is live.  That will make it so that people can 

only buy [BTCLT on the BitClout platform], which will push the price up really high and set a 

higher starting point for when we get listing.” 

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59. At the same time, in keeping with Al-Naji’s goal to launch BitClout under the guise 

of a decentralized project with “no company behind it … just coins and code,” in March 2021 he 

adopted the pseudonym “Diamondhands” in preparation for BitClout’s public launch.   

60. As Al-Naji had explained to an early investor in September 2020, he wanted to 

“launch ‘well-known enough’ that people in the industry know that it’s me but ‘anonymously 

enough’ that the average person visiting the website (or the average regulator) won’t know without 

having to do a ‘real investigation.’”   

61. Al-Naji sought to precisely do just that, leveraging his connections and reputation 

within the crypto asset community to raise substantial funds for the project while publicly 

launching that project behind a pseudonym to hide his ownership and control from “average” users 

and regulators. 

62. Consistent with his attempt to portray BTCLT as being sold autonomously, without 

an identifiable promoter, Al-Naji told investors in February 2021, in a document entitled “Supply 

Curve Summary” that “the ‘counter-party’ for a typical [BTCLT] purchase is the blockchain itself, 

and there is therefore no centralized issuer of the currency.”   

2. Misleading Attempts to Avoid Regulatory Scrutiny 

63. The perception that there was no issuer of BTCLT was also critical to Al-Naji’s 

strategy of attempting to avoid regulatory scrutiny for his project.   

64. Al-Naji understood that the test for whether something was offered or sold as an 

“investment contract” was set out by the U.S. Supreme Court in Howey and he understood that the 

SEC applied this test to determine if a crypto asset was being offered and sold as a security. 

65. To one crypto asset industry participant and prospective investor, Al-Naji explained 

his reasoning and attempts to avoid regulatory scrutiny as follows: 

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My impression is that even being ‘fake’ decentralized generally 
confuses regulators and deters them from going after you.  In the 
case of the SEC it gives you a strong argument [with respect to] 
Howey, but more broadly when you break the mold of ‘a company 
with money in a bank,’ the case becomes riskier in terms of 
litigation, which makes it less likely some career public servant will 
make it their mission to take you down. 

66. In addition to attempting to use the facade that BitClout was not controlled by 

anyone to avoid regulatory scrutiny, he also used it to procure a legal opinion that BitClout was 

not engaged in a securities offering.   

67. On March 18, 2021, around the time of BitClout’s public launch described below, 

Al-Naji obtained an opinion letter from a prominent U.S. law firm that concluded that BTCLT 

sales were not likely to be deemed securities transactions under federal law.   

68. The opinion relied extensively on Al-Naji’s description of the BitClout project and 

its native token in which he falsely represented that (i) “no funds were raised or will be raised to 

finance the development or upgrade of the [BitClout] Network,” (ii) there will be no “individual 

or corporate entity” that “maintains sole control over the Network,” and (iii) BTCLT would be 

marketed “solely for consumptive use” and that Al-Naji had not “and will not promote or support 

listing or trading of [BTCLT] on any third-party trading firm,” even though the opposite was true 

in all respects.   

69. Al-Naji shared that legal opinion with a number of early investors and crypto asset 

trading platforms as part of a concerted effort shortly after BitClout’s public launch to list BTCLT 

on those platforms, assuring them that his project was supposedly on solid legal footing.   

70. The simple reality, however, was that Al-Naji controlled the issuance of BTCLT 

and controlled BitClout.  He could select investors who could obtain BTCLT and when they could 

do so; he controlled the so-called “autonomous” computer program that issued BTCLT from the 

BitClout platform; he controlled the price at which BTCLT was issued; he maintained sole custody 

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over the “treasury” wallet that held the bitcoin proceeds; and he was primarily responsible for the 

design, development, and maintenance of the BitClout platform.   

71. As Al-Naji explained, in November 2020, to one of his earliest prominent investors, 

he “went ahead and hard-coded the price in the contract for you to $1 per [BTCLT], which I didn’t 

do for anyone else.  It’s important to note that this the lowest price any non-angel will *ever get* 

and significantly lower than the last several purchases we’ve processed.”  

3.  Sales to Select Investors 

72. Al-Naji structured two purchase rounds for venture capital investors that he 

personally solicited.  During the first round, approximately 2 million BTCLT at $6 per token, were 

sold via 39 separate contracts dated between January 28, 2021 and February 12, 2021.   

73. The second round involved the sale of approximately 1 million BTCLT at $16 per 

token that was sold via 31 contracts dated between January 29, 2021 and April 14, 2021.  Al-Naji, 

directly or indirectly, entered into another dozen other contracts for the sale of BTCLT in 2020 

and 2021 at different prices per token.  

74. Al-Naji’s ability to guarantee these prices in particular BTCLT sales further 

demonstrate that he, rather than some autonomous mechanism, dictated the pricing and issuance 

of BTCLT.  

75. Purchasers of BTCLT through these contractual sales were not restricted in their 

ability to resell their BTCLT at any time and Al-Naji failed to take any steps to verify the 

accreditation status of the investors. 

76. In total, Al-Naji raised approximately $41 million from these contractual sales of 

BTCLT.  Al-Naji also raised approximately $63 million from sales of BTCLT on the BitClout 

platform to other selected investors to whom he gave passwords which enabled them to purchase 

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directly from the protocol, and whose accreditation status Al-Naji failed to verify.  The remaining 

approximately $153 million of the $257 million amassed in BitClout’s treasury wallet was raised 

via public sales of BTLCT to investors from the BitClout platform, as described below.  

4. Public Sales of BTCLT 

77. In March 2021, Al-Naji began selling BTCLT to the investing public, including 

investors in the United Sates, through the so-called “public launch” of BitClout.  Investors 

purchased BTCLT directly from BitClout by transferring bitcoin to BitClout’s treasury wallet 

using the BitClout platform.   

78. As described above, one of the features of the BitClout platform was the ability to 

purchase Creator Coins using BTCLT.  Creator Coins were billed as a crypto asset that would rise 

and fall in value with the reputation of the person with whom a particular Creator Coin’s identity 

was associated.  In other words, the business model that Al-Naji touted to investors was that 

BTCLT would be needed to purchase Creator Coins, which in turn permitted speculators to invest 

in the value of a celebrity’s brand.  Thus, as Al-Naji promoted it, if BitClout was successful, more 

people would want to buy Creator Coins, raising the demand and therefore the value and price of 

BTCLT, such that BTCLT investors would profit. 

79. BitClout executed a soft launch of its platform on or around March 12, 2021, when 

Al-Naji began enabling the purchase of Creator Coins with BTCLT on the BitClout website via 

passwords that Al-Naji sent to a select group of personal contacts.   

80. As before, the business model that Al-Naji touted was that because BTCLT was 

needed to speculate on Creator Coins, BTCLT would become more valuable if the BitClout 

platform and its Creator Coins became more popular based upon BitClout’s efforts to entice 

celebrities and others to join the BitClout platform in order to claim their Creator Coins. 

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81. Al-Naji encouraged these contacts (including early investors) to send links (and 

passwords) for the BitClout website “to a few trusted people” who the contacts were “100% sure 

aren’t going to leak it so they can buy BitClout ahead of the open and participate in the creator 

coin launch.”  Al-Naji explained that his goal was to let that information leak organically so that 

the BitClout platform and its website could scale up leading to a public launch.   

82. However, BitClout links and passwords began to circulate on social media, which 

according to Al-Naji in an email he sent to a public relations firm he had hired, was “against the 

core team’s wishes since the platform was still too early for mainstream attention.”   

83. After the platform’s launch, Al-Naji and his developers struggled to keep up with 

demand on the website and to manually curate the content that appeared on the BitClout social 

media feed.   

84. Eventually, between late March and early April 2021, Al-Naji removed the 

password protection, enabling anyone to purchase BTCLT from the BitClout platform. 

85. Subsequently, Al-Naji obtained BTCLT’s listings on several crypto asset trading 

platforms, including Blockchain.com (June 15, 2021), AscendEX (July 15, 2021), and Coinbase 

(December 13, 2021), and Huobi (now known as HTX) (June 26, 2023).  

86. To coincide with the initial listing, in early June 2021 Al-Naji sought to boost 

BTCLT’s price by announcing publicly that he would be “turning off the ability the buy [BTCLT] 

with Bitcoin” on the platform, thereby fixing the supply of BTCLT.  

87. Al-Naji stated publicly that he reserved two million of the initial supply of BTCLT 

for himself as the founder.  Accordingly, by choosing to limit the supply of BTCLT to 10.8 million, 

Al-Naji ended up controlling approximately 19% of all BTCLT in existence.  

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88. In a post on BitClout’s social media feed on June 3, 2021, Al-Naji, as 

Diamondhands, described the benefits of fixing the supply of BTCLT at this moment, which he 

referred to as the “Deflation Bomb”:  

In preparation for BitClout’s first exchange listing [on 
Blockchain.com], I’m thrilled to announce the most deflationary 
event in BitClout history.  [BTCLT]’s supply will be fixed forever 
at block 33,783 (Saturday June 12th).  We call this the Deflation 
Bomb … Why is this good?  An asset’s value is determined by 
supply and demand.  When supply stays fixed, higher demand has 
more impact. This means every new user who joins now creates 
value for all existing [BTCLT] holders rather than diluting 
everyone.  No more inflation.  [BTCLT] is also burned in certain 
transactions to reduce the supply even further.  For example, every 
profile creation already burns [BTCLT], and we believe there will 
be many more opportunities to burn [BTCLT] in the future.  With 
these changes, [BTCLT] can now evolve from being just a currency 
to being a globally-recognized store of value.  Where Bitcoin is 
digital gold and Ethereum is digital oil, [BTCLT] can now finally 
claim its seat at the table ... as digital $CLOUT. 

89. Al-Naji further explained to an investor that following the Deflation Bomb, 

purchases of BTCLT on BitClout would be directed to the crypto asset trading platform 

:Blockchain.com “so they get a boost in users and so that price goes up when it lists.”   

90. Al-Naji later disclosed to another investor in September 2021 that he had spent a 

total of $15 million of BTCLT investor proceeds to purchase BTCLT on Blockchain.com. 

91. Following BitClout’s public launch, and in connection with BTCLT’s listing on 

crypto asset trading platforms, Al-Naji continued to promote BitClout and BTCLT’s investment 

potential.   

92. Al-Naji, still maintaining anonymity, also used investor proceeds to engage public 

relations firms to manage communications for the project, and compensated celebrities and social 

media influencers to join and promote the platform. 

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93. Al-Naji also continued to make regular public statements concerning the platform 

and value of BTCLT on BitClout itself.   

94. For example, in a post from “Diamondhands” on BitClout’s social media feed in 

connection with the listing of BTCLT on Blockchain.com, where BTCLT began trading at 

approximately $175, Al-Naji wrote: “Today BitClout goes from being just an experiment to being 

the NYSE of creators.  To celebrate, I thought I’d take a moment to tell you what gets me so 

excited about the future of BitClout … And the best part?  We’re all so unbelievably early to this 

phenomenon.  If [Facebook] is worth $1 trillion, and if BitClout has all of these advantages, then 

what should BitClout be worth?  Even at just $10 billion, the coin price is $10B/10.8M = ~$925” 

95. In another Diamondhands social media post on the BitClout platform on July 5, 

2021, Al-Naji stated:  

We’re all aligned by the fact that we hold [BTCLT], and [BTCLT] 
appreciates with higher transaction volume.  The more devs that 
build on BitClout, and the more open it is, the more we all make.  
This is by design … There is no separate company with equity-
holders, and no room for misalignment here.  [BTCLT] appreciates 
as txn volume increases, and transaction volume is maximized when 
we unleash open, decentralized free markets … And we’re all 
aligned because doing this will maximize transaction volume, which 
will maximize the value of [BTCLT].  The incentives are all set for 
an explosion of innovation in social like we’ve never seen before.  
And once it hits, we’ll wonder how we ever lived without it. 
 

96. And, on September 9, 2021, following a downturn in the price of BTCLT, Al-Naji, 

as Diamondhands, posted on the BitClout social media platform that users should not: 

 “worry about the lull right now.  I’m not aware of a single crypto 
project that didn’t have a period like this, including Bitcoin and 
Ethereum.  Ethereum in particular was aggressively labeled as a 
scam when it launched.  All of this is natural, and I think we’ll come 
out of this dip stronger than ever, with a base that better understands 
the full potential of what we’re doing.  This is it: The moment when 
the paper hands fold, and the true believers buy the dip.”   

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97. In total, Al-Naji sold at least $257 million of BTCLT to investors, including at least 

$153 million during the public sale. 

98. No registration statement was ever filed with the SEC or in effect with respect to, 

and no exemption from registration was available for, any of the above offers and sales of BTCLT, 

be it the private or public sales.  Thus, the offers and sales of BTCLT set forth above violated the 

registration provisions of the federal securities laws. 

C. Al-Naji Misrepresents the Use Of Investment Proceeds 

99. As described above and further below, during and in connection with the 

unregistered offer and sale of BTCLT, Defendant intentionally or recklessly made materially false 

and misleading statements to potential and actual BTCLT investors. 

100. In addition, contrary to Defendant’s express representations to investors, Al-Naji 

spent significant sums of investor funds on expenses that were entirely unrelated to the 

development of the BitClout platform. 

101. As noted, Al-Naji sought to create the illusion of supposed decentralization and 

autonomy to the investing public with respect to BTCLT.  However, the falsity of these 

statements—and Al-Naji’s understanding thereof—is demonstrated, for example, by the fact that 

Al-Naji privately told select early investors in BitClout that he in fact controlled the investment 

proceeds and, importantly, that he in fact was using the BitClout platform’s treasury wallet to fund 

the project’s costs, including hiring developers and other employees.  

102. But even these statements to private investors were materially false and misleading 

and omitted material information, as Al-Naji knew or recklessly disregarded, because Al-Naji did 

not disclose to these early investors that investors funds would be used to fund Al-Naji’s personal 

expenses, including rental of a Beverly Hills mansion and payments to his family members.   

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103. The foregoing information was material because a reasonable investor would have 

considered such information, including information about who was behind the project and what 

the funds would be used for, important to their investment decisions. 

104. In general, even though Al-Naji was telling some select investors in private that Al-

Naji controlled the investment proceeds, Al-Naji generally resisted making any formal 

commitments about the use of investment proceeds in writing and tried to publicly disclaim control 

over the proceeds.   

105. To further the illusion that he did not personally control investment proceeds, Al-

Naji engaged in other deceptive conduct and courses of conduct, including incorporating Relief 

Defendant IHL to broker BTCLT sales by entering into contracts of sale for BTCLT with investor 

counterparties, receiving funds from those counterparties, and custodying BTCLT on their behalf, 

or transferring BTCLT to those investors. 

106. When certain investors suggested an amendment to the purchase and custody 

agreement with IHL to make explicit that IHL would use proceeds from their investments to 

support the BitClout protocol, Al-Naji rejected the changes.   

107. BitClout’s treasury wallet was maintained at a publicly identifiable address on the 

Bitcoin blockchain.  Thus, at the time of BitClout’s public launch in March 2021, investors and 

critics of the platform could see that the project’s treasury wallet contained a large bitcoin balance.  

Some investors criticized the platform’s one-way mechanism, which only permitted BTCLT to be 

purchased and not sold.   

108. At least one early investor who understood that Al-Naji was, in fact, using 

investment proceeds to compensate himself and his development team, urged him to be transparent 

about his use of the proceeds and not keep the accumulated bitcoin for himself.   

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109. Rather than heed this advice, Al-Naji made additional materially false and 

misleading statements about BitClout’s bitcoin treasury wallet in a press interview conducted 

during the month of BitClout’s public launch in March 2021.   

110. Specifically, in an interview with Decrypt published on March 26, 2021, Al-Naji, 

speaking as his pseudonymous persona “Diamondhands,” falsely assured readers that “neither he 

nor BitClout’s developers would use [the treasury wallet] to pay themselves, saying their financial 

incentives are instead tied to the success of the BTCLT token—which he says will one day be 

traded on exchanges, providing a way for its holders to cash out.”  In the interview, Diamondhands 

explained that “BitClout’s developers will soon announce plans to use its Bitcoin stash for 

something ‘good.’” 

111. The true picture of Al-Naji’s use of BitClout investment proceeds starkly differed 

from his materially false and misleading representations to investors that BitClout was an 

autonomous operation and his public statements that he would not use BitClout proceeds to enrich 

himself or to pay other developers, as Al-Naji knew or recklessly disregarded.    

112. In February 2021, Al-Naji also misrepresented to a prominent U.S. venture capital 

firm, which was negotiating a contract with Al-Naji to purchase BTCLT through the Al-Naji-

controlled entity IHL, that IHL “is merely purchasing [BTCLT] from the protocol, and it does not 

have any control over the funds after this purchase is complete.”  This representation was false, as 

Al-Naji, through IHL, did control funds used to purchase BTCLT and this information was 

material because a reasonable investor would have considered such information important to their 

investment decisions. 

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113. After incorporating IHL in July 2020, Al-Naji opened a bank account and crypto 

asset over the counter (“OTC”) trading account in IHL’s name in December 2020 and January 

2021, respectively.   

114. Al-Naji represented to the bank that IHL was a “software developer” that was 

developing BitClout—not a broker or trader as he had represented to investors.   

115. Al-Naji had many early investors deposit fiat currency (e.g., U.S. dollars) into the 

IHL bank account.  He then transferred those funds to the IHL crypto asset OTC account to convert 

the fiat currency to bitcoin, and then transferred that bitcoin to the BitClout treasury wallet in return 

for BTCLT.    

116. In total, the BitClout treasury wallet amassed more than 4,984 bitcoin (valued at 

over $257 million) from investors, of which Al-Naji has withdrawn 2,458 bitcoin (valued at over 

$78 million) ) including by sending some of it back to the same crypto asset and bank accounts in 

the name of IHL, and subsequently on to a brokerage account in his own name. 

117. Al-Naji used significant sums from investors to enrich himself and his family 

members and to compensate those affiliated with the BitClout project.   

118. Among other expenditures, Al-Naji used investor funds to: pay his own living 

expenses, including the rental of a six-bedroom mansion in Beverly Hills and personal credit card 

payments; fund extravagant gifts of cash (of at least $1 million each) to his wife, Relief Defendant 

Buse Desticioğlu Al-Naji, and his mother Relief Defendant Joumana Bahouth Al-Naji; transfer 

funds to accounts in the names of his wholly-owned entities, including Relief Defendants IHL, 

Firestorm Media LLC, Viridian City, LLC, and DeSo Foundation; and to fund personal 

investments in other crypto asset projects. 

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119. In addition to personally enriching himself and his relatives, Al-Naji transferred 

investor funds to BitClout developers, programmers, and promoters, contrary to his public 

statements that he had not and would not use investor proceeds to compensate himself or members 

of BitClout’s development team.   

120. In fact, to pay certain members of that development team in BTCLT, Al-Naji 

transferred investor funds from the BitClout treasury wallet to those individuals and then had them 

purchase BTCLT by sending the bitcoin back to the treasury wallet.   

121. This round-trip transaction had the effect of recycling funds through the treasury 

wallet and, because new BTCLT was created as a result, artificially raising the price at which the 

platform sold BTCLT to other investors thereafter. 

122. In September 2021, Al-Naji decided to rebrand the entire BitClout project to 

“DeSo” (short for “Decentralized Social”).  In connection with the relaunch, Al-Naji publicly 

revealed himself to have been Diamondhands, which had essentially been an open secret.  Al-Naji 

created the DeSo Foundation as part of the rebrand to support the newly-named DeSo platform, 

and claimed to have capitalized it with $200 million (the remaining amount of capital raised from 

the initial sale of BTCLT to early investors).   

FIRST CLAIM FOR RELIEF 
Violations of Securities Act Section 17(a) 

(Against Defendant Al-Naji) 
 

123. The Commission realleges and reincorporates paragraphs 1 through 122 as if fully 

set forth herein. 

124. Defendant, directly or indirectly, by use of means of instrumentalities of 

transportation or communication in interstate commerce or by use of the mails, in the offer or sale 

of securities: (a) knowingly or recklessly employed devices, schemes or artifices to defraud; (b) 

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knowingly, recklessly, or negligently obtained money or property by means of untrue statements 

of material fact, or have omitted to state material facts necessary in order to make the statements 

made, in light of the circumstances under which they were made, not misleading; and (c) 

knowingly, recklessly, or negligently engaged in transactions, practices, or courses of business 

which operated or would operate as a fraud or deceit upon the purchasers of securities.  In 

connection with the offer and sale of BTCLT, Defendant made material misrepresentations of fact 

and engaged in other deceptive conduct, including but not limited to material misrepresentations 

regarding the use of investor proceeds for Defendant’s own personal benefit. 

125. By reason of the actions alleged herein, Defendants violated and unless enjoined 

will continue to violate Securities Act Section 17(a), 15 U.S.C. § 77q(a). 

SECOND CLAIM FOR RELIEF 
Violations of Exchange Act Section 10(b) and Rule 10b-5 Thereunder 

(Against Defendant Al-Naji) 
 

126. The Commission realleges and reincorporates paragraphs 1 through 122 as if fully 

set forth herein. 

127. By reason of the conduct described above, Defendant, in connection with the 

purchase or sale of securities, by the use of the means or instrumentalities of interstate commerce 

or of the mails, or of any facility of any national securities exchange, directly or indirectly, 

knowingly or recklessly (1) employed devices, schemes, or artifices to defraud and/or (2) made 

untrue statements of material facts or omitted to state material facts necessary in order to make the 

statements made, in light of the circumstances under which they were made, not misleading and/or 

(3) engaged in acts, practices, or courses of business which operates or would operate as a fraud 

or deceit upon any persons, including purchasers or sellers of the securities.  In connection with 

the offer and sale of BTCLT, Defendant made material misrepresentations of fact and engaged in 

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other deceptive conduct, including but not limited to material misrepresentations regarding the use 

of investor proceeds for Defendant’s own personal benefit. 

128. By reason of the actions alleged herein, Defendant violated and unless enjoined will 

continue to violate Exchange Act Section 10(b), 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 

17 C.F.R. § 240.10b-5(a) and (c). 

THIRD CLAIM FOR RELIEF 
Violations of Securities Act Section 5(a) and (c) 

(Against Defendant Al-Naji) 
 

129. The Commission realleges and reincorporated paragraphs 1 through 122 as if fully 

set forth herein. 

130. By engaging in conduct alleged above, Defendant, directly or indirectly, through 

use of the means or instruments of transportation or communication in interstate commerce, or of 

the mails, offered to sell or sold securities, or carried or caused such securities to be carried through 

the mails or in interstate commerce for the purpose of sale or for delivery after sale.  Defendant 

created, drafted, edited, and approved promotional materials for BTCLT, and made statements to 

induce investors to purchase these securities.  Defendant directly or indirectly received proceeds 

from the sale of these securities.  

131. No registration statement was filed with the Commission or was in effect with 

respect to the securities offered by Defendant prior to the offer or sale of these securities. 

132. By engaging in the foregoing misconduct, Defendant has violated, and unless 

enjoined will continue to violate, Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C. §§ 77e(a) 

and 77e(c). 

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FOURTH CLAIM FOR RELIEF 
Unjust Enrichment 

(Against All Relief Defendants) 
 

133. The Commission re-alleges and incorporates by reference here the allegations in 

paragraphs 1 through 122.  

134.  Relief Defendant Buse Desticioğlu Al-Naji received at least $1.46 million in 

BTCLT investor funds.  Relief Defendant Buse Desticioğlu Al-Naji had no legitimate claim to the 

funds she received. Relief Defendant Buse Desticioğlu Al-Naji obtained the funds under 

circumstances in which it is not just, equitable, or conscionable for her to retain the funds, and 

therefore was unjustly enriched. 

135. Relief Defendant Joumana Bahouth Al-Naji received at least $1 million in BTCLT 

investor funds.  Relief Defendant Joumana Bahouth Al-Naji had no legitimate claim to the funds 

she received.  Relief Defendant Joumana Bahouth Al-Naji obtained the funds under circumstances 

in which it is not just, equitable, or conscionable for her to retain the funds, and therefore was 

unjustly enriched. 

136. Relief Defendants IHL, Firestorm Media, LLC, Viridian City, LLC, and DeSo 

Foundation are corporate entities created and controlled by Al-Naji and to which he transferred 

BTCLT investor proceeds.  IHL, Firestorm Media, LLC, Viridian City, LLC, and DeSo Foundation 

had no legitimate claim to the funds they received.  Relief Defendants IHL, Firestorm Media, LLC, 

Viridian City, LLC, and DeSo Foundation obtained the funds under circumstances in which it is 

not just, equitable, or conscionable for them to retain the funds, and therefore they were unjustly 

enriched. 

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PRAYER FOR RELIEF 

WHEREFORE, the Commission respectfully requests that the Court enter a judgment: 

(a) finding that Al-Naji violated the antifraud and registration provisions of the federal 

securities laws as alleged herein; 

(b) permanently enjoining Al-Naji from violating Securities Act Sections 5(a), 5(c), 

and 17(a), 15 U.S.C. §§ 77e(a), 77e(c), 77q(a); and Exchange Act Section 10(b), 15 U.S.C. 

§ 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5; 

(c) imposing an injunction pursuant to Exchange Act Section 21(d)(5), 15 U.S.C. 

§ 78u(d)(5), permanently enjoining Al-Naji from participating, directly or indirectly, including, 

but not limited to, through any entity controlled by him, in any offer or sale of securities, including 

any crypto asset security; provided, however, that such injunction shall not prevent Al-Naji from 

purchasing or selling securities, including any crypto asset security, for his own personal account; 

(d) ordering Al-Naji and Relief Defendants Buse Desticioğlu Al-Naji, Joumana 

Bahouth Al-Naji, IHL, Firestorm Media, LLC, Viridian City, LLC, and DeSo Foundation to 

disgorge all ill-gotten gains, plus prejudgment interest thereon, wrongfully obtained as a result of 

Al-Naji’s illegal conduct, pursuant to Exchange Act Sections 21(d)(3), (5) and (7), 15 U.S.C. 

§§ 78u(d)(3), (5) and (7); 

(e) ordering Al-Naji to pay civil penalties pursuant to Securities Act Section 20(d), 15 

U.S.C. § 77t(d), and Exchange Act Section 21(d), 15 U.S.C. § 78u(d);  

(f) permanently barring Al-Naji pursuant to Exchange Act Section 21(d)(2), 15 U.S.C. 

§ 78u(d)(2), and Securities Act Section 20(e), 15 U.S.C. § 77t(e), from acting as an officer or 

director of any issuer that has a class of securities registered pursuant to Exchange Act Section 12, 

15 U.S.C. § 78l, or that is required to file reports pursuant to Exchange Act Section 15(d), 15 

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U.S.C. § 78o(d); and 

(g) granting such other relief to the Commission as the Court may deem just and proper. 

Dated: July 30, 2024 

Respectfully submitted,  
  
SECURITIES AND EXCHANGE  
COMMISSION  
  

 /s/ Christopher J. Carney       
Christopher J. Carney  
Geoffrey Gettinger (pro hac vice application 

 to be submitted) 
U.S. Securities and Exchange Commission 
100 F Street, N.E.  
Washington, DC 20549  
Tel: (202) 551-2379 (Carney) 
[email protected]   

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