The U.S. Securities and Exchange Commission (SEC) declared on November 1 that it is pressing charges against SafeMoon and three of its executives, accusing them of fraud and engaging in unregistered securities sales linked to the SAFEMOON token. Simultaneously, the Justice Department unveiled charges against these individuals.
According to the SEC, Kyle Nagy, the creator of SafeMoon, along with CEO John Karony and Chief Technology Officer Thomas Smith, allegedly withdrew $200 million in assets from the project and misappropriated investor funds. The Justice Department has charged them with conspiracy to commit securities fraud, conspiracy to commit wire fraud, and money laundering conspiracy. While Karony and Smith have been arrested, Nagy remains at large.
The SEC alleges that SafeMoon’s marketing falsely promised that funds would be secured in the liquidity pool and inaccessible to anyone, including the defendants. In reality, a substantial portion of the pool was not locked.
U.S. Attorney Breon Peace stated, “As alleged, the defendants deliberately misled investors and diverted millions of dollars to fuel their greedy scheme and enrich themselves.”
SafeMoon, characterized as a “TikTok meme coin,” experienced a staggering 55,000% surge in value from March 12 to April 20, 2021, reaching a market capitalization exceeding $5 billion. However, it faced a sharp decline when vulnerabilities in a smart contract’s code were exposed. The Justice Department claims the market cap rose to $8 billion.
The SEC contends that Karony and Smith redirected funds to make SAFEMOON purchases, artificially inflating its price. Karony is additionally accused of wash trading. SafeMoon had previously encountered controversy, facing a lawsuit in February 2022, alleging a pump-and-dump scheme involving SafeMoon, Karony, and various celebrities. Furthermore, the token was hacked in March 2023, with the hacker agreeing to return 80% of the funds the following month.