Safemoon’s Chief Technology Officer, Thomas Smith, pleaded guilty to fraud charges in a $200 million case. The US Securities and Exchange Commission filed several charges against the CTO, Safemoon’s CEO, and Kyle Magy, a creator.
Safemoon’s CTO, Thomas Smith, pleaded guilty to wire fraud conspiracy and money laundering charges. In November 2023, the Justice Department and the U.S. Securities Exchange Commission filed charges against three Safemoon officials.
Safemoon CTO reverses his not guilty plea in two fraud charges
The US Securities and Exchange Commission alleged Safemoon CEO Braden John Karony, CTO Thomas Smith, and Creator Kyle Nagy participated in a wire fraud conspiracy. The regulator accused the trio of using the Safemoon token to perpetrate a fraudulent scheme. It also mentioned that the officials released an unregistered crypto asset security and promised to take the token’s price “to the moon.”
The U.S SEC noted that instead of delivering profits to investors they diverted the profits to themselves wiping out billions in market capitalization. The regulator added the officials withdrew over $200 million from the project and misappropriated the funds for personal gain.
David Hirsch, Chief of the SEC Enforcement Division’s Crypto Assets and Cyber Unit(CACU) stated that decentralized finance promises transparency and predictable results. He added unregistered offerings did not offer the disclosures and accountability required by law. Hirsch added that scammers like Nagy exploited the vulnerabilities in the ecosystem to enrich themselves at the investors’ expense.
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The SEC complained that when marketing the Safemoon token, the company assured investors their funds were safely locked and could not be withdrawn. It added that the funds were secured in Safemoon’s liquidity pool, which provided liquidity to enable trading in the asset.
The regulator alleged that a large portion of the liquidity pool was unlocked. It added that this led to the misappropriation of investor funds. The SEC also disclosed the accused used the money to buy McClaren cars and other luxury items.
The prosecutors claimed the Safemoon token had a market cap of $8 billion before it plunged to approximately $4 billion on April 20, 2021. The CTO and Karony were arrested shortly after the complaint while Nagy reportedly fled to Russia.
Karony requests court to push trial ahead of Trump’s proposed pro-crypto policies
Karony and Smith pleaded not guilty to all charges and sought their release last year. In February 2024, Karony was released on a $3 million bond as he awaited trial. On February 5, he filed a motion before a U.S District Court, requesting his legal proceedings be delayed until April 2025. Karony argued that the policy changes under President Trump could lead to the dismissal of some of his charges.
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Karony and Smith’s legal team cited Trump’s Jan 23 executive order and SEC Commissioner Hester Peirce’s statements earlier this month. The SEC commissioner, Hester Pierce, said the agency could actually consider dismissing some crypto cases.
According to the lawyers, given the case’s current schedule, the parties may learn that the Department of Justice no longer considers digital assets such as Safemoon securities days after the trial commences.
The US Attorney’s office filed a response to Karony’s application, saying the motion only pointed to regulatory policies that did not yet exist. John Durham added the money laundering and fraud conspiracy charges would remain even if Trump’s administration reversed its stance against securities.
According to the attorney, the additional counts did not question whether Safemoon was a security. He added that hypothetical policy shifts were not material to the case. Judge Eric Komitee has not yet made his decision on the request.
Trump revealed he planned to nominate Joseph Mocella Jr. to take over the US Attorney’s office for EDNY after Carolyn Pokorny’s departure. The new appointment reportedly makes the future of crypto-related cases uncertain since the new nominee’s stance is unknown.
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