BitClout’s founder gets charged with fraud as VCs pour billions into crypto startups

Chasing clout… A high-profile crypto founder who reportedly raised $257M from retail investors and prominent VCs including Andreessen Horowitz and Winklevoss Capital was arrested on suspicion of fraud. The SEC said BitClout founder Nader Al-Naji spent investors’ $$ on himself and falsely claimed his project was decentralized. Launched in 2021, BitClout was a buzzy entrant to the emerging world of “SocialFi” — short for social finance — which sought to upend social media. In its first month in business, BitClout reportedly scored a $1B valuation and saw $225M in trades.

• Anti-socials: SocialFi mixes decentralized finance and social media. Think: X, but built on the blockchain and not controlled by one company. The goal is to let users monetize accounts that they control.

• BuyClout: BitClout pitched itself as part financial app and part social app. It let traders place crypto-based bets on the popularity of public figures (sorta like a celeb coin). One BitClout token was once valued at $175. It’s now worth essentially nothing.

A speed bump… Al-Naji’s arrest and BitClout’s failure (it shut down months after launch) haven’t dried up the flood of VC cash. DL News reported that this year investors are expected to pump $12B into crypto projects. That’s more than the $8.2B raised last year, though still far from 2022’s boom-era haul of $30B. Analysts say there are a few factors contributing to the projected funding upswing: former President Trump’s embrace of crypto, spot bitcoin and ethereum ETFs, and expected Fed rate cuts. One example of crypto projects benefiting from a VC boost: prediction markets. In May, Polymarket announced a $45M VC investment and last month the platform saw record trading volumes as folks bet on election outcomes.