The US Securities and Exchange Commission (SEC) has charged SafeMoon LLC, its Founder Kyle Nagy, SafeMoon US LLC, and the company's top executives, John Karony and Thomas Smith. The regulator has revealed a massive fraudulent scheme involving the unregistered sale of SafeMoon tokens, a crypto project that had promised investors huge returns.

The SEC accuses SafeMoon and its executives of a fraudulent scheme that misled investors by assuring the safety of their funds while, in reality, large portions of the liquidity pool were never locked. This resulted in misappropriation of funds exceeding $200 million for personal use.

David Hirsch, the Chief of the SEC Enforcement Division's Crypto Assets and Cyber Unit, 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.”

Wash Trading Allegations

SafeMoon experienced a surge in price by over 55,000 percent from March 12 to April 20, 2021. Its market capitalization reached a staggering $5.7 billion during this period. However, this was short-lived, as the truth about the unlocked liquidity pool came to light on April 20, 2021. This revelation led to a nearly 50 percent price crash.

Following the price crash, Karony and Smith allegedly used misappropriated assets to prop up SafeMoon's price and manipulate the market. Additionally, Karony is accused of engaging in wash trading, a practice that created a false impression of market activity.

The SEC has filed its complaint in the US District Court for the Eastern District of New York, charging 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.

SafeMoon Executives Face Multiple Federal Charges

The founders and executives of SafeMoon are facing federal charges of conspiracy to commit securities fraud, wire fraud, and money laundering. Karony, Nagy, and Smith are accused of orchestrating a fraudulent scheme that misled investors in the cryptocurrency SafeMoon (SFM) and misappropriated millions of dollars.

Karony and Smith have already been arrested. Karony was apprehended in Provo, Utah, and Smith in Bethlehem, New Hampshire. However, Nagy remains at large, with law enforcement actively seeking his apprehension. Separately, the US Department of Justice has filed lawsuits against the creators of SafeMoon in a federal court in Brooklyn.