Three of SAFEMOON’s primary officers were just arrested and charged. You can read the full presser here. 😱
Intrestingly, this isn’t just an SEC enforcement action, this involved Homeland Security, the FBI, and the IRS’s crime unit.
Below is a summary of the press release with just some of the major deets.
Defendants and Their Roles
Braden John Karony: Also known as “John Karony” and “CPT HODL T MUN”, 27, Provo, Utah
- Role: Not explicitly stated, but given his arrest and the charges, likely a key decision-maker in SafeMoon LLC.
- Charges:
- Conspiracy to Commit Securities Fraud: Accused of misleading investors about the ‘locked’ nature of SFM liquidity pools.
- Conspiracy to Commit Wire Fraud: Allegedly involved in fraudulent activities that crossed state lines.
- Money Laundering Conspiracy: Accused of illegally diverting and hiding the proceeds of their fraudulent activities.
- Arrest Location: Provo, Utah
Kyle Nagy: Also known as “Safemoon Dev”, 35, Vero Beach, Florida
- Role: Alias suggests a development or technical role in SafeMoon LLC.
- Charges:
- Conspiracy to Commit Securities Fraud: Accused of being part of the scheme to mislead investors.
- Conspiracy to Commit Wire Fraud: Allegedly involved in fraudulent wire activities.
- Money Laundering Conspiracy: Accused of laundering money through various channels.
- Status: Currently at large, whereabouts unknown.
Thomas Smith: Also known as “papa”, 35, Bethlehem, New Hampshire
- Role: Not explicitly stated, but likely another key figure in SafeMoon LLC given the charges and his arrest.
- Charges:
- Conspiracy to Commit Securities Fraud: Accused of fraudulent misrepresentation of SFM liquidity.
- Conspiracy to Commit Wire Fraud: Allegedly involved in fraudulent wire activities.
- Money Laundering Conspiracy: Accused of laundering money, including purchasing a custom Porsche 911 sports car and non-fungible token.
- Arrest Location: Bethlehem, New Hampshire
Nature of Fraud
Misrepresentation:
- Locked Liquidity: The defendants allegedly lied to investors by claiming that the liquidity of SafeMoon (SFM) was ‘locked,’ implying it was inaccessible for fraudulent activities.
- Personal Trading: They also allegedly misled investors by denying that they were personally trading SFM tokens, which would be a conflict of interest.
Misappropriation:
- Diverting Funds: Accused of diverting millions of dollars from these “locked” liquidity pools for personal use.
- Masking Transactions: Allegedly used complex transaction routing and pseudonymous centralized exchange accounts to hide their fraudulent activities.
Market Manipulation:
- Price Inflation: By allegedly lying about the ‘locked’ nature of liquidity and their personal trading, they could have artificially inflated SFM’s market price.
- Rug Pull Risk: The ‘locked’ liquidity was supposed to prevent a “rug pull,” a type of crypto fraud where liquidity is suddenly withdrawn, causing the asset’s value to plummet. The defendants allegedly had the ability to perform such an action but lied about it.
Alleged Misuse of Funds
- False Sense of Security: The term “locked liquidity” was allegedly used to give investors a sense of security, implying that the funds were untouchable and safeguarded against fraudulent activities like “rug pulls.”
- Reality Check: Despite the “locked” tag, the defendants are accused of having full access to these liquidity pools, which they allegedly exploited for personal gain.
- Diverting Funds: The defendants are accused of siphoning off millions of dollars from these liquidity pools. This diversion of funds is at the heart of the securities fraud and wire fraud charges.
- Masking Transactions: To cover their tracks, the defendants allegedly used a series of complex transaction routings and pseudonymous centralized exchange accounts. This is a classic money laundering technique designed to obfuscate the origins of ill-gotten gains.
Lavish Personal Expenditures
- Custom Porsche 911: Specifically, Thomas Smith allegedly used cryptocurrency to purchase a custom Porsche 911 sports car.
- Multiple Real Estate Locations: Properties were purchased in New Hampshire, Utah, and Florida, although the press release doesn’t specify which defendant bought what.
- Non-Fungible Tokens (NFTs): Thomas Smith allegedly also invested in NFTs using the diverted funds.
- Personal Investments: The press release hints at other personal investments but doesn’t provide specifics. Given the nature of the charges, these could range from stock market investments to other forms of high-value assets.