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Nader Al-Naji had it all: an Ivy League education, a résumé that included a stint at Google , and connections to the top venture capitalists in Silicon Valley. Then it all came crumbling down. This week, the FBI arrested Al-Naji—who called himself "Diamondhands"—for fraud related to a cryptocurrency swindle that saw him take in hundreds of millions from investors and users to be part of "BitClout," a short-lived social network that turned people into stock market investments.

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

The BitClout debacle was not Al-Naji's first crypto project. The 32-year-old Los Angeles resident, who was a rower while an undergrad at Princeton, first came to the crypto world's attention when he raised $118 million in 2018 to develop a stablecoin called Basis . Unlike other stablecoins, which require a full reserve of dollars to create a $1 peg to the U.S. dollar, Basis relied on an algorithm—much like the infamous Terra coin that triggered the collapse of crypto markets in 2021. Al-Naji pulled the plug on Basis months after launching it, returning the money. (Al-Naji could not immediately be reached for comment.)

His next foray into crypto didn't end as neatly, however. According to the SEC indictment, Al-Naji obtained an opinion from a major U.S. law firm stating that his proposed BitClout project did not violate securities—but only after lying to the firm's lawyers about how it actually worked.

Per the indictment, Al-Naji then used the legal opinion to persuade venture capital firms, including Andreessen Horowitz, to invest in BitClout, offering them a discount to obtain "BTCLT" tokens. Upon launching the site, he invited people to send Bitcoin to buy BTCLT in order to purchase the avatars he had created for them without permission. All while operating under the pseudonym Diamondhands, Al-Naji continued to profess that the platform was decentralized while also selling BTCLT on cryptocurrency exchanges.

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

Al-Naji quietly folded BitClout months after launching it, and then raised millions from venture capitalists for a new crypto endeavor called DeSo (short for "decentralized social") that has since gone nowhere.

In addition to civil charges filed by the SEC, the FBI is charging Al-Naji with wire fraud , which comes with a maximum sentence of 30 years.