Who is Nader Al-Naji, the Basis Founder Who Duped a16z Twice?
Nestled beside Carnegie Lake in central New Jersey, Princeton University’s serene setting was once the backdrop for Nader Al-Naji’s early mornings as a freshman rower. In 2011, he trained alongside teammates who would go on to achieve great success in various fields, including the Olympics and major corporations like JPMorgan and Tesla.
Al-Naji, a self-proclaimed genius, quickly made a name for himself among Silicon Valley elites, pitching visionary ideas that attracted significant investments from firms like Sequoia Capital, Google, and Bain Capital. However, his ambitious dreams often rested on shaky foundations.
His first startup aimed to create an astonishing cryptocurrency but ultimately failed, which Al-Naji framed as a learning experience. He soon resurfaced with a bolder plan: launching a social network called “Diamondhands,” which would commodify social media profiles without consent. This venture also met with failure.
Despite these setbacks, many of Al-Naji’s supporters remained loyal. However, in July of this year, his fortunes changed when he was arrested by the Department of Justice (DOJ) and charged with misappropriating investor funds to finance a lavish lifestyle in Beverly Hills. Al-Naji dismissed these allegations as governmental “mistakes.”
This saga is another tale of a cryptocurrency figure misleading supporters, yet it raises deeper questions about how Diamondhands managed to deceive the “smartest” investors in Silicon Valley, notably the renowned venture capital firm Andreessen Horowitz (a16z), now cast in the dual role of fraud victim and witness.
Princeton Days
Nick Bax, CEO of a cryptocurrency forensics firm and a former witness in court, recalls the intense training at Princeton, where Al-Naji stood out for his speed and ambitious nature. “Everyone knew Al-Naji,” Bax remarked, emphasizing his drive.
During his time at Princeton, Al-Naji developed an early interest in cryptocurrency, reportedly mining around 23 bitcoins while graduating a year early with a computer science degree. He followed a typical Ivy League path, working at notable firms like DE Shaw and Google before launching his own startup, Basis, in mid-2017.
Basis aimed to create a new type of cryptocurrency that would maintain its value through an innovative algorithm rather than traditional reserve assets. However, skeptics compared it to a Ponzi scheme. Despite this, Al-Naji successfully raised $133 million from wealthy investors, including a16z and Google Ventures.
After an initial hype, Basis faltered and was eventually abandoned due to regulatory challenges. Al-Naji announced he would return remaining funds to investors, but doubts lingered among some backers who questioned his rationale for shutting down the project.
The Rise of Diamondhands
In 2021, as cryptocurrency excitement surged, Al-Naji reemerged with Diamondhands, an anonymous identity behind a decentralized social network. He aimed to disrupt major platforms like Facebook and Twitter by operating solely on “code and tokens.”
To kickstart BitClout, he employed growth hacking tactics, scraping Twitter profiles of 15,000 users to populate the new platform. However, many criticized this approach as a violation of intellectual property rights.
Despite his earlier failures, Al-Naji attracted significant investments, including a pre-sale agreement with a16z and Coinbase Ventures. Initial investors saw substantial returns as the token’s price skyrocketed, but the success was short-lived; Al-Naji soon declared BitClout a “beta test” and shifted focus to a new project, leaving early adopters unable to redeem their tokens.
The SEC later accused Al-Naji of raising $257 million through misleading sales of BitClout tokens while misappropriating the funds for personal expenses, including luxury gifts to family.
a16z’s Involvement
a16z, a powerhouse in the venture capital world, now finds itself labeled as a fraud victim in Al-Naji’s case. Despite their modest $3 million investment, this incident starkly contrasts their usual approach, as funds typically endure losses quietly.
Experts suggest a16z’s involvement as a witness may stem from the DOJ’s strategy to bolster their case by presenting a victim narrative. Yet, despite the unfolding legal issues, a16z seems to have had no ill will toward Al-Naji, appearing to support his ongoing projects.
As Al-Naji faces serious charges that could result in significant prison time, he remains active online, assuring followers that the situation will soon be resolved. Despite his legal troubles, he suggests that the events might even serve as a boon for his future ventures.
Al-Naji’s story serves as a cautionary tale about the cryptocurrency landscape, highlighting the blurred lines between innovation and deception, and the complexities of trust in an unregulated environment.