The U.S. Securities and Exchange Commission [SEC] has taken legal action against key figures behind the controversial cryptocurrency venture, SafeMoon LLC. The regulatory body, in an indictment filed on October 1, accused Kyle Nagy, 35; Chief Executive Braden John Karony, 27; and former Chief Technology Officer Thomas Smith, 35, of orchestrating an extensive fraudulent operation involving the unregistered sale of SafeMoon, a crypto asset security.
Established in 2021 with the issuance of 1 quadrillion tokens, SafeMoon was built on the Binance Smart Chain blockchain. Its initial rise to prominence occurred in April of that year when its native token experienced a significant surge. The project purported to incentivize long-term investors while imposing a 10 percent fee on sellers, a portion of which was intended to benefit existing holders. However, SafeMoon failed to maintain its momentum, witnessing a staggering 99 percent decline from its peak value.
Concerns were raised by auditing firm CertiK, which identified that the owners were acquiring tokens generated from the liquidity pool, granting them control over tokens created as part of the fee. CertiK highlighted this issue in its report, urging SafeMoon to enhance its security protocols.
Legal challenges mounted against the project’s leaders, with accusations directed at various celebrities who had endorsed the coin, alleging their involvement in manipulating investors. The situation escalated further when the Department of Justice [DOJ] prosecutors accused the firm of perpetrating a fraud scheme. This alleged scheme redirected tens of millions of investor dollars, enabling the executives to indulge in luxurious purchases and bolster their personal finances.
SafeMoon Execs’ Lavish Spending Spree
Court documents revealed that SafeMoon had assured investors that its features would propel the token’s value to record highs, promising a journey “Safely to the Moon.” However, investors experienced substantial losses upon learning that the liquidity pool was not secure. Meanwhile, the defendants allegedly withdrew funds for lavish acquisitions, including McLaren and Porsche sports cars, extravagant travel, and opulent residences.
The executives of SafeMoon now face three criminal charges each, encompassing conspiracy to commit securities fraud, wire fraud, and money laundering. Karony was apprehended in Provo, while Smith was arrested in Bethlehem, New Hampshire. Nagy remains at large.
As of the current moment, the cryptocurrency token, once valued at over $8 billion, has plummeted to $50 million, signifying a loss of more than half its initial value.