SEC Alleges That Bitclout Blockchain Protocol Creator Misdirected $257 Million To Himself
In a complaint dated July 30, 2024, the United States #securitiesandExchangeCommission alleged that Nader Al-Naji (âAl-Najiâ) violated the Securities Act and Exchange Act in connection with his creation and operation of the BitClout #blockchain protocol, which is now known as the âDeSoâ blockchain protocol. Nader Al-Naji allegedly misled investors and misdirected over $257 million to himself through a treasury #walletđ„ controlled by him. The SEC also alleged that Buse DesticioÄlu Al-Naji, Joumana Bahouth Al-Naji, Intangible Holdings, LLC, Firestorm Media, LLC, Viridian City, LLC, and DeSo Foundation (collectively, âRelief Defendantsâ) received ill-gotten gains in connection with Nader Al-Naji's activities. Background Concerning the chain of events, the SEC provided the following background: Nader Al-Naji, age 32, is a U.S. citizen who resides in Los Angeles, California.  He personally conceived of and created the BitClout blockchain protocol, which is now known as the âDeSoâ blockchain protocol.  Al-Naji also developed and created the BitClout platform and BTCLT.  He solicited investors to purchase BTCLT to fund the development of the BitClout platform. He further made public misrepresentations about the use of, and misappropriated, investors proceeds raised from the sale of BTCLT.  The SEC added: In 2019, Al-Naji began designing BitClout, a web and application-based social media platform with an interface that promised to be a ânew type of social network that mixes speculation and social media.â  A key selling point for BitClout was that like X, formerly known as Twitter, BitClout users could post content and âlikeâ or share their own or other usersâ content.  Al-Naji also claimed that BitClout would be âdecentralizedâ and its content would be stored and indexed on a blockchain, instead of being controlled by a single corporate entity or person. As such, the platform would purportedly be resistant to censorship.  The SEC continued: BitCloutâs âWhite Paperâ (marketing materials that described the BitClout project) touted BitClout as âlike Bitcoinâ because it was âa fully open-source projectâ with âno company behind it â itâs just coins and code.â  The White Paper further explained that BTCLT would be the native token of the BitClout project. The SEC explained further: According to documents prepared by Al-Naji in conjunction with the BitClout project, the price of BTCLT would automatically double for every million BTCLT sold directly from the BitClout platform, with Al-Naji reserving two million BTCLT for himself as the projectâs founder. Al-Naji explained that purchasing BTCLT through the BitClout platform involved a âtotally decentralizedâ so-called âatomic swapâ whereby investors would deposit the crypto asset bitcoin into BitCloutâs treasury wallet and receive BTCLT in exchange.  This exchange, however, only operated in one direction, meaning that BTCLT investors could not exchange their tokens back into bitcoin or fiat currency (e.g., U.S. dollars) via the BitClout platform. This fact was not explained in the BitClout White Paper.  The BitClout platform was further billed as allowing investors to speculate by creating an opportunity for them to monetize their social media profile and to invest in the profiles of others through âCreator Coins.â Creator Coins were described in the White Paper as a ânew type of asset classâ whose value âis tied to the reputation of an individualâ or their âstanding in society.â The SEC concluded: In reality, as Al-Naji knew or recklessly disregarded, he controlled the issuance of BTCLT from the BitClout platform, including controlling which investors could obtain the crypto asset security and at what price it was sold.  He also controlled the âtreasury walletâ on the blockchain that held the proceeds from the sales of BTCLT and used these proceeds as he desired and for his own personal benefit...  To facilitate the sales of BTCLT to investors, Al-Naji incorporated an entity, Relief Defendant Intangible Holdings, LLC (âIHLâ). IHL entered into sales contracts for BTCLT with investors, received funds from them, and custodied BTCLT for and/or transferred BTCLT to those investors. IHL ultimately transferred the proceeds from these sales to BitCloutâs treasury wallet controlled by Al-Naji.  In total, the BitClout treasury wallet amassed more than $257 million in bitcoin from investors from the beginning of Al-Najiâs unregistered offers and sales of BTCLT during the period of November 2020 to the present. Charges Filed In the circumstances, the SEC requested the following from the court: (a) finding that Al-Naji violated the antifraud and registration provisions of the federal securities laws as alleged herein;  (b) permanently enjoining Al-Naji from violating Securities Act Sections 5(a), 5(c), and 17(a), 15 U.S.C. §§ 77e(a), 77e(c), 77q(a); and Exchange Act Section 10(b), 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5;  (c) imposing an injunction pursuant to Exchange Act Section 21(d)(5), 15 U.S.C. § 78u(d)(5), permanently enjoining Al-Naji from participating, directly or indirectly, including, but not limited to, through any entity controlled by him, in any offer or sale of securities, including any crypto asset security; provided, however, that such injunction shall not prevent Al-Naji from purchasing or selling securities, including any crypto asset security, for his own personal account; (d) ordering Al-Naji and Relief Defendants Buse DesticioÄlu Al-Naji, Joumana Bahouth Al-Naji, IHL, Firestorm Media, LLC, Viridian City, LLC, and DeSo Foundation to disgorge all ill-gotten gains, plus prejudgment interest thereon, wrongfully obtained as a result of Al-Najiâs illegal conduct, pursuant to Exchange Act Sections 21(d)(3), (5) and (7), 15 U.S.C. §§ 78u(d)(3), (5) and (7); (e) ordering Al-Naji to pay civil penalties pursuant to Securities Act Section 20(d), 15 U.S.C. § 77t(d), and Exchange Act Section 21(d), 15 U.S.C. § 78u(d);  (f) permanently barring Al-Naji pursuant to Exchange Act Section 21(d)(2), 15 U.S.C. § 78u(d)(2), and Securities Act Section 20(e), 15 U.S.C. § 77t(e), from acting as an officer or director of any issuer that has a class of securities registered pursuant to Exchange Act
Why is #bitcoinâïž crashing? Isn't there an inverse relationship between BTC and USD? The dollar took some hits this week, so I was just wondering. I thought #bitcoinâïž would be going up now.Â
It also seems like the #FederalReserve is taking too long to consider an interest rate cut. Maybe they will cut too late?
Citigroup ordered to pay $60 Million Today, July 10, 2024
Today, the #FederalReserve ordered Citigroup to pay a civil money penalty of $60,625,620 for various deficiencies. Citigroup agreed to pay the fine without admitting or denying the allegations.
Details of violations are as follows:
1. On October 7, 2020, Citigroup consented to an Order to Cease and Desist issued by the Board of Governors (the â2020 Orderâ) based on significant ongoing deficiencies in implementation and execution by Citigroup with respect to various areas of risk management and internal controls, including for data quality management and regulatory reporting, compliance risk management, capital planning, and liquidity risk management;
2. On October 7, 2020, Citibank consented to the issuance of a Consent Order by the Office of the Comptroller of the Currency (the âOCCâ) to remedy deficiencies in its risk management, internal controls, and data governance and to the assessment of a $400 million civil money penalty (the âOCC Ordersâ).
3. An examination conducted by the Federal Reserve Bank of New York (âReserve Bankâ) in 2023 found that Citigroup had ongoing deficiencies in data quality management and ineffective compensating controls to mitigate associated risks.
4. An examination conducted by the Reserve Bank in 2023 regarding Citigroupâs remediation efforts related to the 2020 Order (the â2020 Order execution examâ) found that Citigroupâs progress in executing its plan to enhance its data quality management program under paragraph 4 of the 2020 Order, or toward the implementation of appropriate compensating controls has not been adequate.
Recently, I bought #pepe⥠when it fell... well when everything was falling a few days ago.
While it started rising again, I think it may be subject to volatility this week when the consumer price index and producer price index info is released on July 11 & 12.
If #pepe⥠falls again at the end of the week, I wonder if it will experience a sharp rise after that.
Market volatility expected today, Friday, June 21, 2024. Crypto will likely experience a similar volatility. If you play the #Prediction game on #PancakeSwap , Friday may be in your favour : )
Fedâs Michelle Bowman Suggests That Regulators Should Foster Innovations Like Ai & Blockchain
According to a speech dated June 17, 2024, entitled âInnovation in the Financial System,â and reportedly delivered at the Salzburg Global Seminar on Financial Technology Innovation, Social Impact, and Regulation, the Federal Reserveâs Michelle W. Bowman suggested that US regulators should foster innovations in the banking system and the broader financial system, including distributed ledger technology and Ai. To achieve this, she encouraged regulators to focus on âdeveloping an understanding of the technology, having an open approach to innovation, and making innovation a priority in the development of regulatory frameworks.â Understanding new technology and innovators Concerning new technology, Bowman said: Take for example, distributed ledger technology (DLT), including blockchain, which is the backbone of some innovations that are being explored in the financial system. DLT provides a way for parties to record transfers of digital assets without the need for any centralized authority and relies on multiple participants who coordinate to maintain a synchronized version of the "ledger." Notwithstanding the DLTâs benefits, she said, "regulators also need to be confident in the players who operate in a particular innovative space.â For example, in the financial services space, Bowman acknowledged banks and their âlong history of innovation.â Generally speaking, entities conducting banking activities are also regulated. In contrast, some of todayâs #blockchain and #AI innovators are not banks and may be unregulated parties. Bowman appeared to indicate that this is an issue when she said, âThe broad range of participants involved in this space presents another layer of complication.â One such âcomplicationâ seems to be that some non-bank innovators âdescribe themselves as financial system "disruptors," which indicates their âambitionsâ to change the existing financial system. According to Bowman, this âproves the need for a deliberate and cautious approach to regulation.â Bowman added: âIt is especially important for regulators to be able to distill the reality from the prototype hype to achieve a comprehensive understanding necessary to inform a policy viewpoint and ultimately an effective regulatory framework.â She continued: In the long run, the goal of financial innovation is to integrate the new technology into the fabric of the financial system. To do so in a responsible way, we need to understand the effects the technology will have, including the risks and consequences of introducing it, and the risks and consequences of its wide adoption in the financial system.It is not my intent to downplay the difficulty of understanding new developments that could change key activities, technology, products, or processes within the financial system. We are in an era of rapid change, and there are a wide range of innovations that may play an important role in the future of the financial system. But within the regulatory perimeter of the banking system, we need to be cautious about the risks of new technology, not only to the safety and soundness of individual financial institutions, but also to financial stability concerns.â While Bowman noted that regulators should be cautious when adopting new technology, she said they should not âpre-judge financial innovation and take a harsh view.â Taking a harsh view and âeliminating innovation,â in her words, âcould result in significant harm to the stability of the financial system and in terms of limiting the role of banking in the economy.â She continued: Hostility to innovation within the banking system often results in activity migrating outside of the banking system. This is not an elimination of the underlying risk of these activities. They remain in the financial system but are often subject to less transparency and less regulation than the same activities conducted by banks. There have been a number of examples in which regulatory approach has driven activity outside the banking industry, thereby creating different and less transparent risks. Put another way, Bowman appears to be saying that while innovations like AI and DLT should not be stifled, they should be subject to regulatory oversight, especially where they have the potential to impact the existing financial system or compliance with regulations. She implied that such oversight or regulation would ensure that âimportant compliance safeguardsâ remain in place âthat deter criminal activity.â According to Bowman, an appropriate way forward is to encourage innovators and regulators to interact and share feedback âthroughout the innovation life cycle and incorporate regulatory feedback on innovation.â She added: âThe more that regulators understand innovation, the more comfortable they will be in accepting and promoting its adoption in the financial system.â She concluded: âAs we continue to enhance our understanding, my hope is that we can strike a more receptive tone to financial innovation, in a way that enables a more innovative, efficient, and effective financial system for the future.â Bowman noted that the views expressed were her own and not necessarily those of her colleagues on the Federal Open Market Committee or the Board of Governors of the #FederalReserve System.
The US Bureau of Labor Statistics said on July 13, 2024 that "The Producer Price Index for final demand declined 0.2 percent in May, seasonally adjusted."
The Bureau added:
"Product detail: Nearly 60 percent of the May decrease in the index for final demand goods can be traced to a 7.1-percent decline in prices for gasoline.
The indexes for diesel fuel, chicken eggs, electric power, jet fuel, and basic organic chemicals also fell.
Conversely, prices for cigarettes rose 3.3 percent.
The indexes for hay, hayseeds, and oilseeds and for residual fuels also moved higher.
Final demand services: Prices for final demand services were unchanged in May after increasing 0.6 percent in April. In May, the indexes for final demand trade services and for final demand services less trade, transportation, and warehousing rose 0.2 percent and 0.1 percent, respectively. (Trade indexes measure changes in margins received by wholesalers and retailers.)
In contrast, prices for final demand transportation and warehousing services fell 1.4 percent.
Product detail: Within the index for final demand services in May, margins for fuels and lubricants retailing jumped 12.2 percent.
The indexes for food and alcohol retailing; outpatient care (partial); automobiles and automobile parts retailing; and apparel, footwear, and accessories retailing also advanced. Conversely, prices for airline passenger services fell 4.3 percent. The indexes for machinery and vehicle wholesaling, professional and commercial equipment wholesaling, portfolio management, and truck transportation of freight also declined. "
The Producer Price Index, which will be released at 8:30 a.m. Eastern today, June 13, 2024, has been described as a pre-indicator of inflation. (Overall, as prices rise for domestic producers, these are expected to be passed on to consumers.)
According to the US Bureau of Labor Statistics, the producer price index has a different composition than the consumer price index released yesterday, June 12, 2024.
The BLS explained that one difference is that "the CPI includes within its scope goods and services purchased by domestic consumers and therefore includes imports. "
The BLS added:
"The PPI, in contrast, does not include imports, because imports are by definition not produced by domestic firms.
Imports compose a substantial portion of the CPI, especially within the apparel and new-cars component, and their inclusion in the CPI and exclusion in the PPI for personal consumption causes a substantial difference between the two indexes.
A final difference in scope between the PPI and the CPI occurs for services whose prices contain an interest rate component. The CPIâs scope excludes changes in interest rates or interest costs. The scope of the CPI includes services, such as banking services and insurance services, whose prices have an interest rate component, but the interest rate component of these services is not included in the index.
The scope of the PPI also encompasses services whose prices include an interest rate component, but this index includes the interest rate component of those prices. Banking services account for approximately 4 percent of the PPI for personal consumption, and insurance services compose 3.8 percent. Within the PPI, changes in interest rates will affect price indexes for banking and insurance. The scope of the CPI includes some banking services, such as ATM fees, and many insurance services; however, the interest rate component of these services is not included. Changes in interest rates therefore do not affect the CPI."
Another useful summary is provided by Investopedia below:
Here is the Federal Reserve's Actual Statement, June 12, 2024:
"Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. In recent months, there has been modest further progress toward the Committee's 2 percent inflation objective.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals have moved toward better balance over the past year. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.
In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent.
In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgageâbacked securities. The Committee is strongly committed to returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments."
Hereâs what the #FederalReserve usually says when interest rates are maintained and what you can EXPECT to hear from them at 2pm today (June 12, 2024):
The Committee remains highly attentive to inflation risks.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run.
In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent.
The Committee will continue to assess additional information and its implications for monetary policy.
In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.
In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. The Committee is strongly committed to returning inflation to its 2 percent objective.
Of course, the Fed also considers geopolitical risks (overseas tensions, war, etc).
Let's see what they actually say at 2pm!
I would avoid rushing into any new positions this morning.
I would wait for the drop.
Then make your own informed, carefully considered decisions...