SEC Dismisses Civil Fraud Case Against DeSo Founder Nader Al-Naji With Prejudice

Case Permanently Closed

The U.S. Securities and Exchange Commission has officially withdrawn its civil fraud case against Nader Al-Naji, founder of BitClout and DeSo, following a joint stipulation filed Thursday in the U.S. District Court for the Southern District of New York.

The dismissal carries significant weight as it was granted with prejudice, permanently barring the SEC from refiling identical claims against Al-Naji or the six relief defendants named in the original complaint. Under the agreement, both parties will cover their own legal costs and fees.

Original Allegations

The SEC initially filed suit against Al-Naji in July 2024, accusing him of raising more than $257 million through unregistered sales of BTCLT, the native token powering the BitClout blockchain-based social media platform. According to the SEC's allegations, Al-Naji assured investors that raised capital would not be used for personal compensation.

However, the agency claimed he misappropriated over $7 million of investor funds on personal expenditures, including rent payments for a Beverly Hills mansion and cash transfers to family members. The complaint also named Al-Naji's wife, mother, and several affiliated entities as relief defendants.

Reasons for Dismissal

The stipulation document references a reassessment of the evidentiary record and the case's specific facts and circumstances as justification for the dismissal. Notably, the filing also cites the SEC's Crypto Task Force, established by then-Acting Chairman Mark T. Uyeda in January 2025 to formulate a comprehensive regulatory framework for digital assets.

The SEC emphasized that this dismissal should not be interpreted as reflecting its stance on any other enforcement actions.

Settlement Terms

As part of the settlement agreement, Al-Naji and the relief defendants waived any claims for reimbursement of legal expenses against the U.S. government. They also released all potential claims against the Commission and its staff related to the case.

Criminal Case Also Dropped

The civil case dismissal follows the Department of Justice's earlier decision to drop parallel criminal wire fraud charges against Al-Naji. Federal prosecutors in the Southern District of New York withdrew that complaint without prejudice in February 2025, though no official explanation accompanied the filing. Unlike the SEC's dismissal, the criminal case could theoretically be refiled.

Following the DOJ's withdrawal, Al-Naji posted on X in March 2025, maintaining his innocence and stating that investigators discovered no wrongdoing despite extensive examination of his private communications, emails, and documents. He noted that the investor referenced in the government's complaint remained profitable on their token purchase and did not consider themselves a victim.

Defense of Decentralization

Al-Naji also contested allegations that BitClout lacked genuine decentralization, claiming prosecutors removed context from his text messages by omitting follow-up clarifications confirming the project's decentralized nature.

Background and Future Plans

A former Google engineer, Al-Naji initially operated BitClout anonymously under the pseudonym "Diamondhands" before revealing his identity in September 2021 alongside the DeSo blockchain launch. The project attracted $200 million in funding from prominent venture capital firms including Andreessen Horowitz, Sequoia, Coinbase Ventures, and Winklevoss Capital.

Al-Naji previously founded stablecoin startup Basis, which ceased operations in 2018 due to regulatory challenges, returning nearly all of its $133 million in raised capital.

In a recent X post, Al-Naji affirmed his commitment: "I want to be clear that I and my team plan on supporting DeSo and Focus indefinitely. DeSo is the world's only blockchain for content, it is actually decentralized, and I couldn't shut it down or censor a piece of content even if I wanted to."

Broader Regulatory Retreat

This dismissal represents another entry in a growing list of SEC crypto enforcement withdrawals under the current administration. The agency has dropped cases against Coinbase, Kraken, Consensys, Cumberland DRW, and Ripple, and dismissed its Gemini Earn lawsuit with prejudice in January. However, Al-Naji's case differed from most withdrawals, which centered on regulatory classification disputes, as his case involved direct allegations of fraud and investor deception.