The filing comes just weeks after it was reported that SafeMoon executives were at the centre of a Department of Justice (DoJ) securities fraud investigation.
Crypto firm SafeMoon on Thursday, December 14, filed for Chapter 7 bankruptcy, also known as liquidation bankruptcy. The filing was done by attorney Mark Rose in the United States Bankruptcy Court for the District of Utah. This comes as the company’s executives face criminal charges in the United States for allegedly defrauding customers of millions of dollars.
The court filing shows that SafeMoon has between 50 and 99 creditors, assets ranging between $10 million and $50 million and between $100,000 and $500,000 in liabilities.
In “liquidation” or Chapter 7 bankruptcy, a debtor’s assets are liquidated to repay creditors. With this type of filing, there are no plans to restructure or relaunch the business as is seen in Chapter 11 bankruptcies, which have been filed by several crypto businesses in recent months.
In a screenshot of a letter said to be from the firm’s restructuring officer, employees are informed that the bankruptcy run was the reason the company had been unable to cover employee wages prior to the filing. The document, which surfaced on Reddit, urges workers to file a claim for their unpaid wages in the bankruptcy court.
The filing comes just weeks after it was reported that SafeMoon executives were at the centre of a Department of Justice (DoJ) securities fraud investigation. The Securities and Exchange Commission (SEC) accused the firm’s founder Kyle Nagy, CEO John Karony and Chief Technology Officer Thomas Smith of conspiracy to commit securities fraud, conspiracy to commit wire fraud and money laundering conspiracy. At the time of the announcement early last month, Karony and Smith were in custody while Nagy remained at large.
US Attorney for the Eastern District of New York Breon Peace said in a statement:
“As alleged, the defendants deliberately misled investors and diverted millions of dollars to fuel their greedy scheme and enrich themselves by purchasing a custom Porsche sports car, other luxury vehicles and real estate.”
The filing has been a topic of discussion in online crypto communities since it came to light with some former SafeMoon supporters expressing their displeasure at the outcome.
Reddit user u/Jtenka wrote:
“The fact of the matter is, everyone has been scammed by the SafeMoon developers, including the mods that supported and trusted SafeMoon.”
Santiago Melgarejo, a former nonfungible token analyst and sales specialist for the firm, pointed out that in retrospect, the “warning signs were there” all along. Melgarejo cited an instance in which a large number of employees were laid off without warning, despite the fact that many of them had worked a month without pay.
Recently learned about SafeMoon’s bankruptcy filing, and my thoughts are with my ex-colleagues who’ve been unpaid for a month, and the holders facing frustration and anger.
Reflecting back, the warning signs were there – notably, when many of us were abruptly fired over several…
— Santi (@Santi_NFT) December 14, 2023
When news of the filing broke, the company’s SafeMoon (SFM) token plunged 31%, going from $0.000065 on Dec. 14 at 8:24 p.m. UTC to $0.000045 in five hours. This is according to CoinGecko data, which also shows that the asset rebounded to $0.000061 in a short 10-minute interval.
At the time of writing, the token is trading at $0.00003530, down 45.5% over 24 hours. Its market cap, which once exceeded $1 billion, now stands at $19,653,009.
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