In a decisive move, the US Securities and Exchange Commission (SEC) has taken legal action against crypto company SafeMoon, leveling charges of fraud and the sale of unregistered securities. The regulatory body continued, targeting the company’s top brass, including founder Kyle Nagy and CEO John Karony.
A recent report revealed alleged misconduct by SafeMoon, accusing the firm of orchestrating a “massive fraudulent scheme” through the unregistered sale of the crypto asset security SafeMoon. The SEC also claimed that the company used investor funds for personal gain.
This marks yet another assertive step by the SEC in its pursuit of regulatory compliance within the digital asset industry. The agency has demonstrated an unwavering commitment to upholding legal standards through enforcement actions, and this latest move aligns with that trajectory.
Specifically, the SEC has brought charges against SafeMoon for fraud and the sale of unregistered crypto securities. Notably, the SEC press release directly implicated creator Kyle Nagy, CEO John Karony, and chief technology officer Thomas Smith in the alleged misconduct.
The charges specify that investors were defrauded and funds were siphoned off for personal enrichment. Additionally, the SEC highlights SafeMoon’s grandiose promise to take its token “safely to the moon” as a smokescreen for their fraudulent activities.
The SEC further asserted that between March 12 and April 20, 2021, the price of SafeMoon experienced an astronomical surge of “more than 55,000 percent.” However, the revelation that the liquidity pool was not as secure as claimed led to a nearly 50% plummet in price after the token had amassed a market cap exceeding $5.7 billion. Allegedly, Karony and Smith then used misappropriated assets to artificially prop up the token’s value and manipulate the market.
David Hirsch, Chief of the SEC Enforcement Division’s Crypto Assets and Cyber Unit (CACU), emphasized that unregistered offerings fail to provide the necessary disclosure and accountability mandated by law. He further admonished that such offerings are fertile ground for scammers like SafeMoon’s creator, Kyle Nagy, who exploit vulnerabilities in these protocols for personal gain, often disregarding the harm inflicted upon their victims.
The SEC issued a stern warning to investors, urging them to exercise extreme caution when venturing into the crypto sector. The agency highlighted the proliferation of scams amid the popularity and adoption of crypto tokens. Scammers entice unsuspecting investors with promises of astronomical profits, ultimately ensnaring them in fraudulent schemes.
