SEC Charges SafeMoon and Creators for Massive Crypto Fraud Scheme
The U.S. Securities and Exchange Commission (SEC) has filed charges against SafeMoon LLC, along with its creator Kyle Nagy, SafeMoon US LLC, and the companies' CEO John Karony and CTO Thomas Smith.
Because Bitcoin
November 1, 2023
The U.S. Securities and Exchange Commission (SEC) has filed charges against SafeMoon LLC, along with its creator Kyle Nagy, SafeMoon US LLC, and the companies' CEO John Karony and CTO Thomas Smith. The charges pertain to an alleged fraudulent scheme involving the unregistered sale of the cryptocurrency asset SafeMoon.
According to the SEC's complaint, the defendants made claims about taking the price of the SafeMoon token "safely to the moon," but instead of delivering profits, they are accused of causing significant losses in market capitalization, withdrawing over $200 million worth of crypto assets from the project, and misappropriating investor funds for personal use.
"Decentralized finance claims to deliver transparency and predictable outcomes, but unregistered offerings lack the disclosures and accountability that the law demands, and they attract scammers like Kyle Nagy, who use these vulnerabilities to enrich themselves at the expense of others," stated David Hirsch, Chief of the SEC Enforcement Division's Crypto Assets and Cyber Unit (CACU).
The SEC's complaint alleges that Nagy, in marketing the SafeMoon Token, assured investors that their funds were safely locked and could not be withdrawn, while held in SafeMoon's liquidity pool, which provides liquidity for trading. However, large portions of the liquidity pool were allegedly never locked, and the defendants are accused of misappropriating funds for personal expenditures, including luxury cars, travel, and homes.
The SafeMoon token experienced a rapid price increase of over 55,000 percent from March 12 to April 20, 2021, reaching a market capitalization exceeding $5.7 billion. However, its price dropped nearly 50 percent on April 20, 2021, when it became public knowledge that SafeMoon's liquidity pool was not as secured as claimed. Following this drop, Karony and Smith are alleged to have used misappropriated assets to manipulate the market.
The SEC's complaint charges the defendants with violating the registration and anti-fraud provisions of the Securities Act of 1933 and the anti-fraud provisions of the Securities Exchange Act of 1934. The case is filed in the U.S. District Court for the Eastern District of New York.
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