The company behind Safe Moon promised astronomical returns, but instead the cryptocurrency imploded in mid-flight. And now those behind the controls face the consequences.
in a Wednesday's complaintThe Securities and Exchange Commission accused the company behind the coin, SafeMoon LLC, along with creator Kyle Nagy, CEO John Karony and CTO Thomas Smith, of violating securities laws in "a massive fraudulent scheme." ".
The Justice Department filed parallel charges against the trio, charging them with three counts each of conspiracy to commit securities fraud, wire fraud and money laundering. Karony and Smith were arrested Wednesday, but Nagy is still at large, according to the Department of Justice.
Although the defendants promised to take the token "safely to the moon," the SEC alleges that company leaders secretly removed more than $200 million in crypto assets from the project to pay for, among other things, McLaren cars, houses luxury and extravagant. travel.
The cryptocurrency amassed a market capitalization of $5.7 billion at its peak, following an increase of more than 55,000% between March 12 and April 20, 2021. then quickly began to fall apart when investors discovered that large portions of SafeMoon's liquidity pool were never locked, causing the token's price to drop by 50%.
Nagy, according to the SEC, had promised investors that their funds were securely locked in SafeMoon's liquidity pool and that not even top executives could access them.
The complaint also alleges that Karony and Smith used misappropriated assets to purchase large amounts of SafeMoon in an attempt to stabilize the price of the token, and that Karony created a trading account to buy and sell tokens "to create the impression of market activity." , a practice known as wash trading."
The defendants are accused of violating the anti-fraud and registration provisions of the Securities Act of 1933 and the anti-fraud provisions of the Securities Exchange Act of 1934.
The SEC has stepped up its cryptocurrency enforcement actions this year despite criticism from industry players. In June, the agency sued the world's largest cryptocurrency exchange, Binance, and CEO Changpeng โCZโ Zhao for several alleged securities violations. The agency also sued US-based cryptocurrency exchange Coinbase..
The Safemoon cryptocurrency plummeted more than 70% on Thursday following news of the SEC and DOJ charges.
