November 2, 2023

Memecoin SafeMoon and Executives Charged with Fraud by SEC

SEC charges SafeMoon and executives with fraud for allegedly operating a large-scale scam and wiping out billions of dollars in market value.

The US Securities and Exchange Commission (SEC) has filed a fraud case against the once-popular memecoin SafeMoon and its founders.

The SEC alleges that SafeMoon founder Kyle Nagy, SafeMoon US CEO John Karony, and SafeMoon US CTO Thomas Smith operated a large-scale fraud scheme through the unregistered sale of the SafeMoon cryptocurrency security.

Despite promising to take the token price "safely to the moon", the defendants allegedly wiped out billions of dollars in market value, siphoned over $200 million in crypto assets from the project, and misappropriated investor funds for personal gain.

SEC Enforcement Division's Crypto Assets and Cyber Unit (CACU) Chief David Hirsch warned that unregistered sales lack required disclosures and accountability, making them attractive to fraudsters who exploit these vulnerabilities for personal enrichment.

According to the SEC's complaint, Nagy assured investors that the funds were securely locked in SafeMoon's liquidity pool and could not be withdrawn. However, much of the liquidity pool was allegedly never locked up, and the defendants allegedly embezzled millions of dollars for personal luxuries such as McClaren cars, extravagant trips, and luxury homes.

CACU Vice President Jorge G. Tenreiro urged investors to be extremely careful with crypto assets due to their popularity among scammers promising astronomical profits.

The complaint also alleges that SafeMoon's price increased by more than 55,000 percent from March 12 to April 20, 2021, reaching a market value of more than $5.7 billion. However, on April 20, 2021, its price dropped nearly 50 percent when it was revealed that SafeMoon's liquidity pool was not locked as claimed.

Following this decline, Karony and Smith allegedly used assets they had embezzled to make large purchases to raise SafeMoon's price and manipulate the market. Karony is also accused of using an account on a trading platform to buy and sell SafeMoon to create the appearance of market activity.

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