- The Department of Justice filed conspiracy charges against SafeMoon executives for allegedly diverting millions of dollars for personal luxury purchases.
- The SEC is also suing them for violating securities law through the unregistered sale of its SFM cryptocurrency.
- Two of SafeMoon’s executives were arrested, but the company’s founder remains at large.
The US Department of Justice filed criminal conspiracy charges against the founders and executives of crypto project SafeMoon on Wednesday.
SafeMoon creator and founder Kyle Nagy, CEO Braden John Karony, and former CTO Thomas Smith were charged with conspiracy to commit securities fraud, wire fraud, and money laundering.
Karony was arrested in Provo, Utah, and Smith was arrested in Bethlehem, New Hampshire. Nagy remains at large, the DOJ said.
“The defendants deliberately misled investors and diverted millions of dollars to fuel their greedy scheme and enrich themselves by purchasing a custom Porsche sports car, other luxury vehicles and real estate,” said US Attorney for the Eastern District of New York Breon Peace.
The Securities and Exchange Commission also sued the trio for violating securities laws, accusing them of “perpetrating a massive fraudulent scheme through the unregistered sale” of SFM, the cryptocurrency issued by SafeMoon Labs.
SFM plunged 55% on news of the charges.
Originally launched in March 2021 under the ticker SAFEMOON, the token soared to over $8 billion in market capitalisation, according to the DOJ.
The project’s meteoric rise happened on the back of multiple celebrity endorsements, including from YouTube phenomenon Logan Paul and Barstools Sports founder Dave Portnoy.
Part of SafeMoon’s appeal resided in the project’s economics: every SAFEMOON transaction was subject to a 10% tax, which was then split between SAFEMOON holders and the coin’s liquidity pools.
This meant that early holders theoretically received income from late adopters, while increasing liquidity pools attracted larger investors.
The DOJ claims that SafeMoon executives intentionally diverted millions of dollars from the SAFEMOON liquidity pools, and repeatedly bought and sold SAFEMOON tokens despite telling investors that they weren’t trading the token.
Nagy, Karony, and Smith then used the proceeds to buy luxury vehicles and real estate in New Hampshire, Utah, and Florida, the DOJ alleged.
SAFEMOON was rebranded to SFM in December 2021, and its token addresses migrated.
Tom Carreras is based in Costa Rica. Got a tip about crypto law enforcement? Reach out to tcarreras@dlnews.com.