The United States Attorney’s Office for the Eastern District of New York has charged the founders and executives of the DeFi project SafeMoon with a multi-million-dollar fraud scheme.
Founders and Executives of Digital-Asset Company Charged in Multi-Million Dollar International Fraud Scheme
Announced with @NewYorkFBI @HSINewYork @IRSCI_NY https://t.co/mIFyoF2wFL
— US Attorney EDNY (@EDNYnews) November 1, 2023
Authorities allege that John Karoni, Kyle Nagy and Thomas Smith deceived buyers of the SFM token, issued on a public blockchain.
The defendants claimed that the liquidity pool assets were “locked.” Instead, when the project’s market capitalization reached $8 billion, the defendants allegedly moved “tokens worth millions,” which they spent on personal consumption, prosecutors say.
“They intentionally misled investors and redirected funds to fuel their fraudulent scheme and enrichment by purchasing a Porsche sports car, other luxury cars and real estate,” the prosecutor Breon Peace noted.
According to investigators, SafeMoon LLC launched SFM in March 2021. The smart contract implemented a 10% transactional fee on the asset. Half of the fee was distributed to token holders, the other half went to the liquidity pool, where it was allegedly blocked.
Within a few months the number of investors exceeded one million, and the market capitalization reached $8 billion.
Authorities allege that the defendants deliberately misled investors about “blocked tokens.” The defendants not only withdrew funds from the pools, but also traded the assets, manipulating prices to their own benefit.
Publicly they denied owning and trading SFM, and hid transactions through a complex routing system and anonymous exchange accounts, investigators say. The proceeds were used to purchase luxury cars and real estate in New Hampshire, Utah and Florida.
“For instance, Smith, using controlled cryptocurrency addresses, sent 2,900 BNB worth more than $860,000 tracked to the SFM liquidity pool, third-party, to acquire a Porsche 911 sports car and невзаимозаменяемый токен,” the press release states.
Karoni and Smith have been arrested, Nagy remains at large. Prosecutors stressed that the defendants are presumed innocent until proven guilty.
Earlier, in March a hacker вывел из пула SafeMoon assets worth about $9 million, but expressed a desire to return the funds.