The SEC has accused SafeMoon's CEO, John Karony, CTO, Thomas Smith, and founder, Kyle Nagy, of involvement in a large-scale fraudulent scheme involving the unregistered sale of the crypto asset security SafeMoon. The SEC alleges that the defendants promised investors high returns but instead misappropriated funds, causing significant losses to investors and destroying crypto assets valued at over $200 million.

According to David Hirsch, chief of the SEC Enforcement Division’s Crypto Assets and Cyber Unit (CACU), decentralized finance lacks regulatory oversight, making it vulnerable to fraudsters like Kyle Nagy.

Kyle Nagy assured investors of the safety of their funds during the promotion of the SafeMoon Token, but the defendants allegedly misused a substantial portion of the funds for personal gain, leading to a decline in the project's market value.

Jorge G. Tenreiro, Deputy Chief of the CACU, warned investors to be cautious, as fraudsters often exploit the demand for crypto assets by making false promises of high profits.

The SEC lawsuit alleges that SafeMoon's prices surged by over 55,000% between March 12 and April 20, 2021, reaching a market capitalization of over $5.7 billion before plummeting by nearly 50%. It was revealed on April 20, 2021, that SafeMoon's liquidity pool had not been locked as claimed, leading to a decline in prices. Karony and Smith allegedly used embezzled funds to artificially inflate SafeMoon's prices and manipulate the market.

The SEC has filed a lawsuit in the U.S. District Court, accusing the defendants of violating the Securities Act of 1933 and the Securities Exchange Act of 1934 through fraudulent conduct related to the sale of securities.

The investigation was conducted by John Lucas with assistance from Pamela Sawhney, John Crimmins, John Marino, and Sejal Bhakta. Deborah A. Tarasevich, Jorge G. Tenreiro, and David Hirsch supervised the investigation. Legal efforts in court will be led by Oren Gleich and Dean M. Conway, under the supervision of James Connor. The SEC acknowledges the assistance of the U.S. Attorney’s Office for the Eastern District of New York and the FBI in initiating a similar criminal action.