DOJ and SEC Go After SafeMoon Crypto Founders for Fraud

The line between legitimate enterprises and fraudsters often appears hazy in web3, as recent legal actions against the executives of SafeMoon have shown.

The U.S. Department of Justice (DOJ) unsealed an indictment while the Securities and Exchange Commission (SEC) filed civil charges against SafeMoon executives, marking a significant downturn for a once-promising crypto venture.

SafeMoon's Success and Legal Troubles

SafeMoon, a cryptocurrency project that made waves in the industry with its unique transaction fee redistribution model, has faced scrutiny from regulatory bodies due to allegations of fraudulent activities.

The DOJ and SEC have been actively pursuing cases of fraud and malicious activities in the crypto space, and the SafeMoon case is just one example of their efforts.

The project, which was launched in March 2021, quickly gained traction among crypto enthusiasts, but its success was short-lived as its executives, Braden Karony, Thomas Smith and Kyle Nagy, were indicted by the DOJ and faced charges from the SEC.

Accused Executives

Braden Karony and Thomas Smith found themselves in custody following their arrest in Provo, Utah, and Bethlehem, New Hampshire. The third executive, Kyle Nagy, continues to evade capture, adding to the intrigue and drama of the situation.

The charges against SafeMoon's executives are severe, alleging conspiracy to commit securities fraud, wire fraud and money laundering. The SEC didn't waste any time, filing civil charges on the same day, describing it as a "massive fraudulent scheme," which underscores the gravity of the accusations.

SafeMoon's situation is unfortunately not unique in the cryptocurrency space. Other cases of fraud have been uncovered, such as BitConnect, which defrauded thousands of investors worldwide and resulted in a restitution order of over $17 million.

2023 witnessed a significant upsurge in cryptocurrency fraud on a global scale, highlighting the ongoing struggles that investors and regulators encounter in this arena. The SEC's lawsuit against Beaxy led to its shutdown in March due to allegations of violating federal law, and FTX's founder Sam Bankman-Fried was found guilty November 2 in a New York fraud trial.

Implications for Investors

The alleged fraudulent activities have led to a devastating loss for investors, running into the hundreds of millions. The recent indictment of SafeMoon's founders and several other individuals associated with the company has sent shockwaves through the cryptocurrency market, leading to a dramatic decline in the value of the company's token.

According to CoinMarketCap, the token's value has plummeted by over 95% from its all-time high of $0.007232, reaching a low of $0.000037. In a tweet, Unusual_Whales, a popular Twitter page now known as X, highlighted the devastating impact of the alleged fraud on investors.

Quite a dump. Source: Twitter/X

Central to the indictment is the false representation of 'locked' liquidity and misappropriation of funds for personal extravagances. Luxurious purchases, including a custom Porsche 911 and real estate acquisitions, were allegedly funded from the misappropriated money. The indictment also outlines the use of complex transaction routing and pseudonymous accounts to mask these illicit activities.

The Future of SafeMoon

With ongoing investigations by the SEC and DOJ, the road ahead looks turbulent for SafeMoon. If convicted, the accused face severe legal repercussions. This case serves as a stark reminder for investors and the general public of the inherent risks involved in cryptocurrency investments.

The allegations against SafeMoon generated a substantial community reaction. "Internet detective" and YouTuber Coffeezilla, also known as Stephen Findeisen, made several allegations, claiming that the funds meant for SafeMoon's liquidity pool were misappropriated by its founders. The former CTO of SafeMoon had approached Coffeezilla to expose suspicious activities surrounding the project.

A notable fallout was the plummeting market cap of SafeMoon from over $1 billion to $300 million, following allegations that it was designed as a rug pull project from the outset. The community also witnessed class action lawsuits being brought against SafeMoon, alleging false and misleading statements to investors. This case and others are a reminder that doing proper research and spending the time necessary to understand crypto is key.