- Crypto
- November 2, 2023
- 3 minutes read
U.S. Government Indicts, Arrests SafeMoon Execs For Fraud
The United States Justice Department has unsealed indictments against the founder and executives of SafeMoon, a “meme token,” for allegedly…
The United States Justice Department has unsealed indictments against the founder and executives of SafeMoon, a “meme token,” for allegedly defrauding investors.
The government charged founder Kyle Nagy, chief executive Braden John Karony, and former chief technology officer Thomas Smith, each with three criminal counts of conspiracy to commit securities fraud, conspiracy to commit wire fraud, and money laundering conspiracy.
- The SafeMoon digital token was founded in 2021 and became one of the top “meme coins,” referring to tokens with little to no utility or real-life value and, instead, attracts traders through internet hype.
- This token charged a 10% fee on all transactions, with 5% redistributed to token holders and the other 5% sent to wallets in a different token, Binance Coin (BNB), and purportedly “locked” to infuse liquidity into the SAFEMOON/BNB trading pair. SafeMoon token holders could easily swap their tokens for BNB via the “locked” liquidity pool.
However, prosecutors allege SafeMoon’s founders diverted millions of dollars worth of BNB tokens from the liquidity pool to fund luxury vehicles and real estate while telling investors it was “locked,” implying they had no direct access to it.
In one example, Smith allegedly diverted 2,900 BNB worth over $860k to buy a custom Porsche vehicle and a non-fungible token (NFT).
- Karony was arrested in Utah on Wednesday, and Smith in New Hampshire. Nagy remains at large.
The U.S. Securities and Exchange Commission (SEC) separately charged the three defendants for selling unregistered securities and misappropriating investor funds. The SEC claims they withdrew more than $200mn of tokens from the liquidity pool to manipulate SafeMoon’s price by buying it in large blocks and also diverted some for sports cars, travel, and luxury homes.
SafeMoon grew viral shortly after launching in March 2021, reaching a market capitalization of $5.7bn barely a month later. However, the token has collapsed (alongside most fellow meme tokens), with a market value of just about $50mn as of writing. The price fell over 50% following the unsealed indictments.
