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SEC Charges SafeMoon and Executives with Fraud in Unregistered Crypto Securities Offering

SEC Charges SafeMoon and Executives with Fraud in Unregistered Crypto Securities Offering

SEC files charges against SafeMoon execs - alleges massive fraudulent scheme which wiped out billions in market capitalization and saw executives misappropriating over $200 million in investor funds for personal use.

The Securities and Exchange Commission (SEC) has filed charges against SafeMoon LLC, its creator Kyle Nagy, SafeMoon US LLC, CEO John Karony, and CTO Thomas Smith, accusing them of engaging in a fraudulent scheme through the unregistered sale of the crypto asset security, SafeMoon.

The SEC alleges that the defendants promised to take the price of the token "Safely to the moon," but instead, they wiped out billions in market capitalization, withdrew crypto assets worth more than $200 million from the project, and misappropriated investor funds for personal use.

David Hirsch, Chief of the SEC Enforcement Division’s Crypto Assets and Cyber Unit (CACU), stated, "Decentralized finance claims to deliver transparency and predictable outcomes, but unregistered offerings lack the disclosures and accountability that the law demands, and they attract scammers like Kyle Nagy, who use these vulnerabilities to enrich themselves at the expense of others."

According to the SEC’s complaint, Nagy assured investors that funds were safely locked and could not be withdrawn by anyone, including the Defendants, while held in SafeMoon’s liquidity pool. However, large portions of the liquidity pool were never locked, and the Defendants misappropriated millions of dollars to purchase luxury cars, extravagant travel, luxury homes, and other items.

Jorge G. Tenreiro, Deputy Chief of the CACU, urged investors to exercise extreme caution in the crypto space, as fraudsters often exploit the popularity of crypto assets to promise astronomical profits while frequently only delivering a crash landing.

The SEC’s complaint alleges that SafeMoon’s price skyrocketed by more than 55,000 percent from March 12 to April 20, 2021, reaching a market capitalization exceeding $5.7 billion before its price plummeted by nearly 50 percent when the public learned that SafeMoon’s liquidity pool was not locked as claimed. After this plunge, Karony and Smith allegedly used misappropriated assets to make large purchases of SafeMoon to prop up its price and manipulate the market. Karony also allegedly used an account he opened on a trading platform to buy and sell SafeMoon to create the impression of market activity, a practice known as wash trading.

The SEC’s complaint, filed in the U.S. District Court for the Eastern District of New York, charges the defendants with violating the registration and anti-fraud provisions of the Securities Act of 1933 and the anti-fraud provisions of the Securities Exchange Act of 1934.


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