How Safe Was SafeMoon? DOJ Busts Execs For Fraud

• The U.S. Department of Justice announced charges against three SafeMoon LLC executives for defrauding investors.
• The charged executives are Braden John Karony, Kyle Nagy, and Thomas Smith.
• Charges include conspiracy to commit securities fraud, wire fraud, and money laundering.

The U.S. Department of Justice announced charges on November 2, 2023, against three executives of SafeMoon LLC for allegedly defrauding investors out of millions of dollars through misrepresentations about their cryptocurrency asset SafeMoon (SFM).

• Braden John Karony, Kyle Nagy, and Thomas Smith were charged with conspiracy to commit securities fraud, conspiracy to commit wire fraud, and money laundering.
• Karony was arrested in Provo, Utah, while Smith was arrested in Bethlehem, New Hampshire. Nagy remains at large.
• The executives allegedly lied about SFM’s locked liquidity being inaccessible to them and personally traded SFM while denying doing so publicly.
• Millions of SFM liquidity funds were allegedly misappropriated by the executives for personal purchases like luxury cars.

According to the charges, SafeMoon launched its SFM token in March 2021, quickly amassing over 1 million holders and a market capitalization of over $8 billion. The popularity of the cryptocurrency asset grew rapidly in a short period of time.

A 10% tax was automatically applied to all SFM transactions, with 5% going to token holders and 5% going to liquidity pools. The liquidity pools were supposed to make it easier for investors to buy and sell SFM.

SafeDepartment of Justice alleges SafeMoon executives made false statements

The Department of Justice alleges that the SafeMoon executives made false statements to investors about the liquidity pools in order to misappropriate funds.

Specifically, they claimed the pools were “locked” to prevent rug pulls, a type of scam where asset liquidity is removed. However, prosecutors say the executives actually maintained access to divert funds from the pools for personal gain.

Additionally, the executives publicly stated that they did not hold or trade SFM tokens themselves. However, according to the charges, they secretly executed SFM trades worth millions of dollars for substantial personal profits, especially when prices were at their peak.

By hiding transfers across crypto wallets, exchanges, and NFTs, the Department of Justice says the executives tried to cover their tracks after misappropriating investor funds. IRS Criminal Investigations claims over $860,000 in traceable proceeds were spent on a custom Porsche 911 sports car.

In total, the executives are accused of misappropriating millions in funds through their “greedy scheme,” said U.S. Attorney Breon Peace. The Securities and Exchange Commission assisted with the investigation.

This case demonstrates the Department of Justice’s increasing focus on prosecuting crypto and digital asset fraud schemes as the space continues to grow. The arrests of two SafeMoon executives mark one of the most high-profile enforcement actions taken against a decentralized finance project and its leadership team to date.