The U.S. Securities and Exchange Commission (SEC) and Department of Justice charged the founder of crypto social media platform BitClout with wire fraud and the sale of unregistered securities.

According to court documents, Nader Al-Naji – known pseudonymously as “Diamondhands” – raised approximately $257 million from the sale of BitClout’s native token, BTCLT. Al-Naji led investors to believe that the money would be used to pay him and other BitClout employees, but instead spent “more than $7 million of investor funds on personal expenditures” including renting a mansion in Beverly Hills and giving family members “extravagant cash gifts,” an SEC press release said Tuesday.

Al-Naji was arrested Saturday and presented to a magistrate judge in California on Monday, the DOJ said.

The SEC has accused Al-Naji of taking steps to make BitClout seem like a decentralized project with “no company behind it…just coins and code.” In addition to using a pseudonym, the SEC’s complaint pointed out that Al-Naji “allegedly secured a letter from a prominent law firm opining, based on his mischaracterizations of the nature of his project, that BTCLT were not likely to be deemed securities under federal law.”

“As alleged in our complaint, Al-Naji attempted to evade the federal securities laws and defraud the investing public, mistakenly believing that ‘being “fake” decentralized generally confuses regulators and deters them from going after you,’” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement in a press release. “He is obviously wrong: as we have shown time and again, and as reflected in the SEC’s detailed allegations here, we are guided by economic realities, not cosmetic labels. The dedicated staff of the SEC uncovered Al-Naji’s lies and will now hold him accountable for misleading investors.”

Several members of Al-Naji’s family, including his wife and mother, are named as relief defendants for the investor funds transferred to them by Al-Naji in the SEC’s lawsuit.

Parallel criminal charges have been filed against Al-Naji by prosecutors in the Southern District of New York. Al-Naji has been charged with one count of wire fraud for the BitClout scheme, a charge which carries a maximum sentence of 20 years in prison if convicted.