The founder of the popular cryptocurrency startup BitClout, Neuder al-Svetzhi, is facing accusations from the SEC of fraud and illegal securities. Al-Svetzhi, who used a pseudonym to elude regulators, managed to attract over $257 million in cryptocurrency.
The decentralized social platform bitclout secured funding from well-known companies like A16Z, Sequoia, Social Capital, Coinbase Ventures, and Winklevoss Capital. In its seed round, the company raised around $7 million.
According to SEC data, Al-Svetzhi, also known as Diamondhands, assured investors that funds from the sale of BTCLT tokens would not be used for personal expenses. However, it was revealed that Al-Svetzhi spent over $7 million on personal needs, including a mansion in Beverly Hills and gifts for family members. A source close to Al-Svetzhi claims the mansion was used for business purposes.
BitClout has been embroiled in controversy from the start. In 2021, the platform allowed users to trade tokens based on people’s reputations. The company replicated the profiles of 15,000 Twitter users without consent and linked tokens to them, leading to criticism and legal issues. Rio Network co-founder Brandon Curtis demanded his image be removed without permission. Former Singaporean Prime Minister Lee Hsien Loong requested his profile be taken down, stating it was created without authorization.
Despite the controversies, many investors supported BitClout due to Al-Svetzhi’s reputation earned from his previous Basis project. In 2018, Al-Svetzhi raised $140 million to create a stablecoin but returned the funds to investors due to regulatory concerns, with investors reportedly receiving about $0.93 for every $1 invested.
In early 2021, Al-Svetzhi raised funds for BitClout but later experimented with a stock market feature, causing dissatisfaction among some investors. Eventually, the company shifted focus to the Deso blockchain, aiming to decentralize social networks.
Although some tech leaders defended BitClout, others were critical. Despite this, some investors were enthusiastic, investing thousands of dollars in tokens due to the system of rewarding user engagement and Al-Svetzhi’s “transformative vision.”
Al-Svetzhi’s secretive persona is a central point of the