Safemoon Founders Indicted for Fraudulently Diverting Investor Funds

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The founders of cryptocurrency Safemoon have been indicted on charges of securities fraud, wire fraud, and money laundering related to the alleged misappropriation of millions of dollars of investor funds. Braden John Karony, Kyle Nagy, and Thomas Smith were charged in an indictment unsealed Thursday in federal court in Brooklyn.

Safemoon Founders Charged With Conspiracy to Commit Securities Fraud

Karony was arrested in Provo, Utah while Smith was arrested in Bethlehem, New Hampshire. Nagy remains at large. According to the indictment, the defendants lied to Safemoon investors about the use of “locked” liquidity and their personal holdings and trading of the token. As Safemoon’s market capitalization grew to over $8 billion, the defendants allegedly diverted millions of dollars worth of “locked” tokens for personal purchases like luxury cars, real estate, and personal investments.

“As alleged, the defendants deliberately misled investors and diverted millions of dollars to fuel their greedy scheme and enrich themselves by purchasing a custom Porsche sports car, other luxury vehicles, and real estate,” said U.S. Attorney Breon Peace in a statement. The U.S. Attorney added:

As fraudsters increasingly use digital assets to mislead investors and misappropriate funds, our Office will be at the forefront of pursuing them and their ill-gotten gains.

The indictment alleges the defendants falsely claimed that locked Safemoon liquidity pools prevented insider “rug pulls” and that the pools would not benefit developers. In reality, the Department of Justice (DOJ) insists defendants allegedly retained access to divert funds for personal gain, buying and selling Safemoon despite claims that they did not hold the token.

“Although this fraud scheme may be complex, the end result is simple — theft,” said IRS Criminal Investigation special agent-in-charge Thomas Fattorusso. “Investors were assured their money would be safe while the defendants allegedly misled investors and diverted millions of dollars to line their pockets and their driveways.”

The charges include conspiracy to commit securities fraud, conspiracy to commit wire fraud, and conspiracy to commit money laundering. Karony, Nagy, and Smith are presumed innocent unless proven guilty. The case is being handled by the DOJ’s Eastern District of New York’s Business and Securities Fraud Section.

The crypto asset safemoon (SFM) shed more than 11% in value after the DOJ published the news.

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