The SEC charged SafeMoon and its executives with fraud and illegal securities sale, alleging they deceived investors and misappropriated US $200 million.
The DOJ indicted SafeMoon executives for fraud and money laundering, asserting investor deception and personal enrichment from ‘locked’ funds.
Two of the executives have been arrested, while one remains at large, as the price of SafeMoon drops.
SEC Alleges Fraudulent Scheme
The U.S. Securities and Exchange Commission (SEC) has charged SafeMoon LLC, its creator Kyle Nagy, SafeMoon US LLC, CEO John Karony, and CTO Thomas Smith with conducting a fraudulent scheme. They are accused of the unregistered sale of SafeMoon, a crypto asset security, and misleading investors with promises of profitability. The scheme led to the loss of billions in market value and the personal misappropriation of over US $200 million (AU $311 million) in crypto assets by the defendants.
The SEC claims that the defendants lied about locking funds to ensure safety and instead used investor money for personal luxuries. The complaint also details how the price of SafeMoon surged and then plummeted after the truth about the liquidity pool was revealed, with the executives allegedly manipulating the market to stabilise the price afterwards.
Jorge G. Tenreiro, Deputy Chief of the CACU cautioned investors, saying,
We urge investors to continue to exercise extreme caution in this space, as fraudsters exploit the popularity of crypto assets to promise astronomical profits while all too frequently only delivering a crash landing.
Jorge G. Tenreiro
DOJ Adds Criminal Charges
At the same time the Department of Justice (DOJ) charged the three executives in a federal court in Brooklyn with multiple conspiracy charges, including securities fraud, wire fraud, and money laundering, related to their operation of SafeMoon LLC and the digital asset SafeMoon (SFM). They are accused of deceiving investors about the accessibility of SFM’s ‘locked’ liquidity and their personal dealings in SFM. Despite SafeMoon’s market cap reaching over US $8 billion (AU $12.45 billion), the defendants allegedly syphoned off millions in ‘locked’ liquidity for personal use.
The indictment details that, contrary to promises made to investors, the defendants used the misappropriated funds for personal luxuries such as a custom Porsche and other high-end purchases.
Ivan J. Arvelo, Special Agent in Charge of Homeland Security Investigations (HSI) said,
Instead of rewarding their clients as promised, their insatiable greed led them to spend millions of dollars on their own lavish desires. Today, no luxury vehicles or sprawling real estate can protect them from the consequences of such crimes.
Ivan J. Arvelo
Arrests Made, Price Drops
Karony has been arrested in Utah, Smith in New Hampshire, while Nagy is still at large. U.S. Attorney Breon Peace, along with officials from the FBI, HSI, and IRS-CI, announced the arrests and emphasised the commitment of law enforcement to pursuing those who defraud investors in the digital asset space.
While the hunt for Nagy continues, Arvelo reiterated, “HSI New York will relentlessly pursue individuals who seek to exploit investors and the American financial system for their own gain.”
Source: CoinMarketCap
Meanwhile, the price of SFM plummeted by over 50%, just to slightly recover at the time of writing.
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