The U.S. Securities and Exchange Commission has agreed to dismiss a civil fraud lawsuit against Noder Al-Naji, the founder of the BitClout blockchain project, now DeSo, under a joint settlement filed this week in the Southern District of New York.
The SEC originally filed a lawsuit in July 2024 accusing Al-Naji of offering unregistered securities by selling BTCLT, BitClout’s original token.
Al-Naji allegedly marketed BitClout as a decentralized project with a central operator and even launched the platform under the pseudonym “Diamondhands”. The SEC claimed that despite these allegations, it retains control over token issuance, pricing, and treasury wallets containing investor funds.
The complaint also alleges that Al-Naji misappropriated investor funds and spent millions of dollars on personal expenses, including luxury housing and transportation for family members, while publicly stating that the trust funds were not used for personal compensation.
In the joint ruling, the SEC said it had re-examined the factual record and circumstances of the case and decided that a waiver was appropriate. The parties agreed to dismiss the lawsuit with damages for the conduct alleged in the complaint.
Al-Naji founded BitClout in 2021 as a decentralized, Twitter-like platform where users can invest in tokens of social influence. The project has received funding from top investors such as a16z, Sequoia and Coinbase Ventures.
After facing criticism for destroying user data and questions about its decentralization, as well as legal problems, the platform was renamed DeSo (Decentralized Social).
Prior to BitClout, Al-Naji launched an algorithmic stablecoin project called Basis, which secured more than $133 million in 2018 from notable investors including Bain Capital Ventures, a16z, and Lightspeed.
Kevin Warsh, president of Donald Trump’s FR, participated in this round as an angel investor, but left the project after the project stalled.
