The decentralized finance protocol, SafeMoon, has recently filed for Chapter 7 bankruptcy protection amidst mounting accusations of fraud and mismanagement. The company’s founders, Kyle Nagy, Thomas Smith, and Braden Karony, are currently facing a $200 million lawsuit from the U.S. Securities and Exchange Commission (SEC), alleging securities fraud.
Accusations of Misleading Investors
The bankruptcy filing comes in the wake of a tumultuous period for SafeMoon, where they have been accused of orchestrating a carefully planned scheme of deception and manipulation. The SEC has claimed that investors were given false assurances regarding the safety of their funds in the company’s liquidity pool, which, contrary to representations, could be withdrawn. This raised concerns and skepticism surrounding SafeMoon’s rapid ascent.
SEC Lawsuit and Bankruptcy Announcement
In November 2023, the SEC dealt a significant blow to SafeMoon by filing a civil suit against Nagy, Smith, and Karony. The lawsuit alleges a colossal securities fraud scheme, accusing the trio of raising over $200 million through unregistered securities offerings and misappropriating substantial sums for personal use. Chief Restructuring Officer Kenneth Ehrler communicated internally to SafeMoon employees, announcing the bankruptcy filing and simultaneously terminating all employment contracts, effective immediately. Employees were advised to file claims for unpaid wages and benefits through the bankruptcy court.
The news of SafeMoon’s bankruptcy filing had an initial negative impact on the native cryptocurrency, Safemoon. Its price dropped from $0.000065 to $0.000045 within a five-hour period. However, the cryptocurrency’s value quickly recovered. Currently, Safemoon is trading at $0.000059, indicating a 9% decline in the last 24 hours, according to Coingecko data.
