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SafeMoon CTO Thomas Smith Pleads Guilty in $8B Crypto Fraud Case

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  • SafeMoon CTO Thomas Smith pleaded guilty to securities fraud conspiracy and wire fraud conspiracy.
  • Prosecutors accused SafeMoon executives of misappropriating investor funds for personal use.
  • Authorities revealed that SafeMoon leaders falsely claimed liquidity pools were locked.

Thomas Smith, the Chief Technology Officer of SafeMoon LLC, pleaded guilty to securities fraud conspiracy and wire fraud conspiracy. His admission follows an extensive investigation into the company’s alleged misappropriation of investor funds. In a recent court filing, Smith initially pleaded not guilty but changed his stance.

SafeMoon Executives Accused of Fraudulent Practices

Authorities accused SafeMoon executives of misleading investors about the security of the company’s liquidity pools. Prosecutors stated that the company’s leadership falsely assured investors that these pools were locked to prevent a rug pull. However, officials revealed that Smith and other executives retained access and redirected millions of dollars for personal gain.

Investigators found that SafeMoon co-founder Kyle Nagy, CEO Braden John Karony, and Smith engaged in deceptive financial activities. They allegedly transferred misappropriated funds through unhosted crypto wallets and complex transaction routing. This strategy concealed the origins of the money and facilitated unauthorized withdrawals.

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Federal prosecutors stated that the accused executives used the fraudulent proceeds to acquire luxury assets. Authorities reported that Smith used investor funds to purchase a custom Porsche 911 sports car and a non-fungible token (NFT). Officials emphasized that the misuse of funds betrayed the trust of SafeMoon investors.

Legal Proceedings and Smith’s Guilty Plea

Smith’s guilty plea significantly advances the ongoing legal battle against SafeMoon’s executives. His decision to admit guilt reverses his 2023 plea, which initially denied the charges. Legal experts suggest that Smith’s cooperation may impact the proceedings against his co-defendants.

Karony, who faces similar charges, is scheduled to stand trial later this month. A judge recently denied his request to delay the trial, rejecting claims that evolving cryptocurrency regulations justified a postponement. With Smith’s plea, attention now shifts to Karony’s defense strategy and the potential consequences he faces.

Nagy’s legal status remains uncertain, as reports indicate he is currently in Russia. Authorities have not disclosed any plans to extradite him for prosecution. His absence raises questions about the ability to hold all involved parties accountable.

Fraud in Crypto Market Raises Concerns

The SafeMoon case highlights the risks of cryptocurrency investments and fraudulent financial schemes. Investors placed trust in company executives who assured them of fund security and long-term returns. However, the case underscores the importance of verifying financial claims and corporate transparency.

Authorities warn that fraudulent practices in the crypto market can have widespread consequences. Misuse of investor funds undermines confidence and leads to increased regulatory scrutiny. Experts advise investors to remain vigilant and prioritize companies that demonstrate ethical leadership and compliance.

As the legal process continues, the SafeMoon scandal is a cautionary tale. Investors are encouraged to conduct due diligence and assess potential risks before investing, and regulatory bodies are expected to strengthen oversight to prevent similar incidents.

Crypto Lender Nexo Refutes Fund Misuse Charges; Releases Rebuttal Post

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Crypto Lender Nexo became a target of an online expose after a series of allegations emerged accusing the firm of misappropriating charity donations.

Denying the claims calling it ludicrous and defamatory, the lending platform shot out a cease and a desist notice to the anon accuser who goes by the name of Otteroooo.

Nexo also released a blog post addressing the same. In the post, the lending firm slammed the attack calling it “another smear campaign against the firm and profiting from short positions in a distressed market”.

It then offered a rebuttal to one of Otteroooo’s sensational charges that the founder of the charity HelpKarma Constantine Krastev and co-founder of Nexo “Konsta Kanchev” is the same person who is embezzling funds from donations to help build a palace instead of using the money for children’s medical treatments.

Nexo responded by saying that a “Konsta Kanchev” doesn’t exist and Otter purposely made the name “to mimic a typo as an excuse to fact-checkers” by confusing two separate people, HelpKarma founder Constantine Krastev and its own co-founder Kosta Kantchev, as the same.

It also posted screenshots of chat logs sent to Nexo by a person who attempted to buy Otteroooo’s account which the latter was apparently looking to sell his profile ‘for the right price.’

But on a June 26 Twitter thread posted by Otter, they countered the allegation by calling the messages to be a “set up” to force them into being silent.

Nexo Says This Isn’t The First Time

Two years back, the firm wrote that there was “a coordinated attack, using the same tactics as the present one – fabrication of lies, distortion of facts, and a massive social media campaign by anonymous trolls to link Nexo to the now infamous Zeus Capital report.”

An elaborate conspiracy theory was created to smear us and an intensive online harassing campaign against a researcher of ours, leaving the employee seriously traumatized.

Nexo concluded by saying that it would not only back down, but emerged stronger, and grow twenty-fold in size, assets, and reach. “We have done so before, we will do so again,” it added.

U.K. Law Enforcement Detains Woman With Fraudulently obtained Bitcoin Worth $150,000

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According to an official statement by the UK Metropolitan Police Service (MPS), a 35-year-old woman was arrested on 12 August by detectives from the Met’s Proactive Money Laundering Team for controlling a large amount of fraudulently obtained Bitcoin. At the time of the arrest, the suspect had Bitcoin amounting to about $150,000 in the wallet.

Detectives began the investigation after finding that several mule bank accounts received funds for fake applications from government-subsidized loans known as the ‘Bounce Back Loans’, small business support projects during the COVID-19 pandemic.

The Fraud Trail

After fraudulently obtaining the money from the government fund, these sums of money were transferred from the mule accounts to the suspect’s cryptocurrency wallet and the funds used to purchase Bitcoin. On Wednesday, the Metropolitan Police Service, together with a number of Suffolk Constabulary Proactive Crime Team officers, proceeded to search the house in Ipswich after securing a search warrant.

Subsequently, Team searched the residential address in Ipswich where several children were found alone at the residence, and the suspect was found nearby and was detained for child abandonment, money laundering and fraud. The woman was taken to a police station where she was interviewed and released after a while awaiting further investigation.

Metropolitan police officers went ahead and successfully submitted an application for the confiscation of the fraudulent Bitcoin held in the crypto wallet of the suspect.

Sergeant Ian Barrett urges the public to remain vigilant

Detective Sergeant Ian Barrett, who is also part of the money laundering team, urged the public to be more cautious about their private as well as any banking information they share online. If they feel like their bank accounts are being used, they should inform their service provider or action fraud immediately.

Additionally, he noted that it was horrible for people to take advantage of government assistance; provided to people who need it during difficult times. Furthermore, he affirmed that the Metropolitan Police Service is dedicated to combat organized financial crimes; and arrest the criminals by teaming up with organizations in the regulated financial sector and law enforcement.

Crypto Brothers Lied to Investors in $31M Fraud, Says SEC

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According to a press release issued on June 19 by the United States Securities and Exchange Commission ( SEC), the crypto brothers Sean and Shane Hvizdzak received $31 million from investors and reportedly transferred some of the funds to their private accounts. The SEC attained a temporary restraining order, and assets freeze against the crypto brothers, after filing an emergency action. As per the filing, the High Street Capital fund run by the two took substantial funds from investors that were supposed to go towards cryptocurrency trading

Crypto brothers transferred investor funds to private accounts

However, the watchdog asserts that the pair had lied to investors about the performance of the investment, replicated documents, and fake financial data as the two had moved most of the investor funds to their accounts. According to the SEC, the funds raised by investors amounted to $31 million, but $26 million was transferred to private accounts.

The SEC filing provides comprehensive, in-depth details of the movement of funds between the High Street Capital accounts and those of the Hvizdzaks crypto brothers. In addition, the fund claimed substantial returns on investment; for instance, 100.77 percent in Q3 2019 and 92.9 percent in Q4 2019. In reality, the investment suffered losses over the two periods.

Series of lies

Additionally, the fund asserts to own $157 million worth of assets as of December 31, 2019. $107 million is said to be in New York-based Gemini crypto exchange and custody service firm. However, the fund had only $2.2 million in cash and just $0.53 in a Gemini account.

As per the court filing, the crypto brothers utilized their private Gemini accounts to exchange fiat with digital assets of the same value. Afterward, the investor funds were transferred to “unattributed, non-custodial locations on various blockchains.”

Co-founder of Centra Tech Crypto Firm Pleads Guilty to ICO Fraud Promoted by Mayweather and DJ Khaled

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The crypto founder of Centra Tech crypto firm, Robert Joseph Farkas, also known as “RJ,” pleaded guilty on 16 June on charges of conspiracy to commit securities and wire fraud. The 2017 ICO fraud was promoted by celebrities such as the Floyd Mayweather boxing icon and the DJ Khaled music producer.

According to a press release published by the Department of Justice, crypto founder Robert Farkas pleaded guilty to conspiracy to commit securities and wire fraud in connection with a dubious cryptocurrency project that hoodwinked investors up to $25 million.

Farkas, along with his team, used false information and data omission to lure investors to purchase securities in the form of tokens issued by Centra Tech. The tokens were distributed in the form of an Initial Coin Offering ( ICO) in early July 2017.

Co-founder of Centra Tech crypto firm lied to investors

Centra Tech was one of the many startups that took advantage of the ICO boom in 2017. After promising investors that the funds would develop a range of financial products for the digital economy, the firm distributed unregistered CTR tokens.

The co-founder of Centra Tech Crypto and his team also lied to investors about the firm’s partnership with some of the world’s leading financial services companies. For example, investors were once told that the firm had reached an agreement with Visa and MasterCard; to develop a Centra Fiat-to-Crypt card that would facilitate an instant conversion. The two companies, however, denied the claims.

Celebrity endorsements

Nevertheless, the most effective weapon in their arsenal was the endorsement by international icons such as boxing champion Floyd Mayweather and popular hip hop and record producer DJ Khaled. Mayweather and Khaled urged their fans to invest in Centra Tech; leading to a successful ICO that ran between July 2017 and March 2018.

Furthermore, investors also sued the two celebrities for infringing securities regulations; however, a federal court discharged them from the case in May 2019. In the case of Farkas, he will pass judgment on a date that will be determined. He could face a ten years prison sentence.