SafeMoon’s CEO and CTO Arrested Amid Allegations of Misusing Over $200M
In a startling turn of events, the U.S. Department of Justice (DOJ) has taken SafeMoon’s CEO, John Karony, and Chief Technology Officer, Thomas Smith, into custody over allegations of massive fraud against their investors. The Securities and Exchange Commission (SEC) is also closely pursuing the case.
The accusations involve the withdrawal of more than $200 million by SafeMoon’s executive team from the project’s funds, which they had previously claimed were “locked.” The funds were allegedly used for personal luxuries, including the purchase of high-end vehicles and real estate.
The DOJ’s U.S. Attorney for the Eastern District of New York, Breon Peace, stated, “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.”
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SafeMoon creator Kyle Nagy, also known as “Safemoon Dev,” remains at large, according to the DOJ.
The charges against the individuals include conspiracy to commit securities fraud, conspiracy to commit wire fraud, and money laundering conspiracy. For instance, Thomas Smith, known as “Papa,” is accused of diverting tokens to purchase a Porsche 911.
In response to these developments, SafeMoon’s token SFM saw a significant drop of over 30% on the day of the arrests. Efforts to contact the accused parties through the company website and social media channels have proven unsuccessful.
Furthermore, in addition to the criminal charges, the SEC has levelled securities violations against the defendants. David Hirsch, Chief of the SEC Enforcement Division’s Crypto Assets and Cyber Unit (CACU), commented on the situation, saying, “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.” The SEC also alleged that the three individuals were involved in “perpetrating a massive fraudulent scheme through the unregistered sale of the crypto asset security.”
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SafeMoon, introduced in 2021 during a bullish market period, positioned itself as a meme coin and assured its users that staked funds would be “locked” in a liquidity pool. However, the SEC claims that this was not the case, alleging that a significant portion of the liquidity pool remained unlocked and was utilized by the executives for personal expenditures, travel, and expensive cars.
Even though SafeMoon’s executives had claimed not to hold any SFM personally, the SEC contends that they repeatedly traded these tokens for their own gain, amassing substantial profits. To obscure their gains, they allegedly used private, unhosted wallets and pseudonymous exchange accounts.
The case continues to unfold as authorities delve deeper into these serious allegations.
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