February 29, 2024

SafeMoon founders arrested on wire fraud and money laundering charges

  • SafeMoon founders arrested; Kyle Nagy at large.
  • The charges include wire fraud and money laundering.
  • There are also accusations of misappropriation and investor deception.

In a significant development, the founders of SafeMoon, a decentralized finance digital asset, are facing criminal charges in the United States.

Braden John Karony and Thomas Smith have been arrested, while Kyle Nagy remains at large. The US Attorney’s Office for the Eastern District of New York has charged them with conspiracy to commit wire fraud and money laundering.

The arrests and allegations

Braden John Karony and Thomas Smith, two of the individuals behind SafeMoon LLC, were apprehended in Provo, Utah, and Bethlehem, New Hampshire, respectively. They are accused of participating in a scheme to defraud investors in SafeMoon. This cryptocurrency, issued by SafeMoon LLC, gained immense popularity, with its market capitalization exceeding $8 billion.

The charges revolve around allegations that the defendants misled SafeMoon investors. They misrepresented the accessibility of “locked” liquidity, which was supposedly beyond their reach. Furthermore, they are accused of diverting and misappropriating millions of dollars from the liquidity pool for personal gain.

A background on SafeMoon

SafeMoon tokens (SFM) were introduced in March 2021 by SafeMoon LLC on a public blockchain.

A unique feature of SFM transactions was the imposition of a 10% tax, with 5% allocated to benefit SFM holders and the other 5% to designated liquidity pools.

The larger the liquidity pool, the greater the liquidity in the market for SFM. It quickly gained more than one million holders and a market capitalization of over $8 billion.

SafeMoon founders’ fraudulent scheme

The indictment as per the United States Attorney’s Office Eastern District of New York, alleges that the defendants made false representations to investors, including the use of “locked” liquidity pools to prevent rug-pulling.

They also claimed that tokens in the liquidity pool wouldn’t be used for personal enrichment. However, it is alleged that the defendants maintained access to the liquidity pools and intentionally diverted and misappropriated millions of dollars’ worth of tokens for their personal benefit.

Moreover, they are accused of engaging in SFM trading for their own gain, even at the peak of SFM’s market price, resulting in substantial profits. The defendants concealed the movement of these funds through various methods, including private un-hosted crypto wallets and pseudonymous centralized exchange accounts. The misappropriated funds were allegedly used to purchase luxury vehicles and real estate in different states.

The charges in the indictment are allegations, and the defendants are presumed innocent until proven guilty in a court of law. The case is being handled by the US Attorney’s Office’s Business and Securities Fraud Section.

This case highlights the importance of regulatory oversight in the cryptocurrency industry to protect investors and maintain trust in digital assets. As the legal proceedings unfold, more details will emerge, and the accused individuals will have their day in court to address these serious allegations.

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