SafeMoon Executives Face DOJ Arrest, SEC Charges – SFM Falls More Than 50

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The Securities and Exchange Commission (SEC), the American financial markets supervisory authority, has filed charges against SafeMoon, its creator Kyle Nagy, its CEO John Karony and its technical director Thomas Smith. The SEC claims they carried out a “massive fraud scheme” involving the unregistered sale of the SafeMoon (SFM) token, defined as “cryptoasset security.”

According to the complaint, the defendants allegedly destroyed billions in market value, misappropriated investor funds, and withdrew more than $200 million in cryptoassets for personal use. The SEC also warns to be cautious when it comes to decentralized finance (DeFi).

Kyle Nagy reportedly assured investors that SafeMoons' liquidity pool funds were securely locked and no one could access them. The SEC found, however, that much of the liquidity pool was never locked and that the defendants allegedly misappropriated millions of dollars to make luxury purchases.

The SFM token initially rose in value by over 55,000% before falling by almost 50% when the public learned that the liquidity pool was not blocked as claimed. The defendants allegedly misappropriated assets in order to manipulate the market and prop up the price of SafeMoon through wash trading.

The SEC charges the defendants with violating the registration and fraud enforcement provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.

A securities fraud charge was also filed in federal court in Brooklyn. It is alleged that the defendants participated in a conspiracy to commit securities fraud, wire fraud, and a conspiracy to commit money laundering. U.S. Attorney Breon Peace has emphasized the commitment to prosecuting digital asset fraudsters.

After the indictment was published, the SFM token fell by over 52% and is currently trading at its lowest price since its launch. Over the past seven, fourteen, and thirty days, the token has seen declines of 49%, 34%, and 24%, respectively.

It should be noted that the charges are only allegations and the defendants are presumed innocent until proven guilty. The SEC and law enforcement authorities continue to be committed to holding cryptocurrency fraudsters accountable.