An up-and-coming Utah businessman was arrested Wednesday after authorities say he was involved in a scheme that used investor funds to purchase luxury vehicles and real estate.
Braden John Karony, the 27-year-old CEO of cryptocurrency company SafeMoon, is charged with conspiracy to commit securities fraud, conspiracy to commit wire fraud and money laundering conspiracy. He was taken into custody in Provo, according to the U.S. Attorney’s Office of Eastern New York.
SafeMoon founder Kyle Nagy, 35, and chief technology officer Thomas Smith, 35, were also arrested and charged with the same three criminal counts. Smith was arrested in Bethlehem, New Hampshire, according to the U.S. Attorneys Office; as of Thursday afternoon, Nagy remained at large.
“Mr. Karony looks forward to returning to New York and vigorously defending his charges. He maintains his innocence,” said Karony’s attorney, Clayton Simms.
Karony was born in Virginia, according to court documents, and served in the U.S. Army for six years. He attended both Utah Valley University and LDS Business College, now known as Ensign College. An indictment filed in U.S. District Court in Eastern New York alleges he purchased an 8,000-square-foot home in Pleasant Grove using funds from the fraudulent scheme. According to Zillow, the home is worth more than $1.5 million.
SafeMoon is currently registered in Pleasant Grove, according to the Utah Department of Commerce, and was created in March 2021 with the minting of 1 quadrillion tokens. The executives allegedly grew SafeMoon to a market capitalization of more than $9 billion, the indictment claims.
The company was touted by media personality Dave Portnoy, founder of Barstool Sports, who told his fans he had invested more than $40,000 in SafeMoon. Portnoy later “told people it may be a scam,” he wrote on X, the platform formerly known as Twitter.
Karony was also named one of the 2022 Utah CEOs of the year by Utah Business, a Deseret News sister company.
Karony and his colleagues allegedly lied to investors, according to court documents, telling them their money was “locked” into a liquidity pool that would increase in size due to a 10% tax imposed on every SafeMoon transaction.
That locked pool prevented SafeMoon executives from removing liquidity, Karony and his colleagues allegedly told investors, according to the indictment. SafeMoon executives claimed “that tokens in the liquidity pool would not be used to enrich the SafeMoon developers,” court documents read. They also promised investors “that the developers were not holding and trading SafeMoon for their benefit,” according to the indictment.
The indictment claims “hundreds of thousands” of investors held SafeMoon and in April 2021, the company recorded its highest daily trading volume of $43.96 million.
But according to the indictment, Karony and the other defendants did have access to the “locked” pools, and intentionally diverted and misappropriated “millions of dollars’ worth of tokens from the SafeMoon liquidity pools for their personal benefit.”
“In addition, although they publicly denied that they personally held or traded SafeMoon, Karony, Nagy and Smith repeatedly bought and sold SafeMoon for their personal benefit, including at the height of SafeMoon’s market price, which generated millions of dollars in profits,” prosecutors allege in the indictment.
Karony and his colleagues carried out the scheme from March 2021 to April 2023, according to the indictment.
Those proceeds were allegedly used to buy real estate in New Hampshire, Florida and Utah, including the Pleasant Grove home, prosecutors say. Smith bought a custom Porsche 911 after withdrawing $860,000 traceable to the SafeMoon liquidity pool, the indictment states.
“Although this fraud scheme may be complex, the end result is simple — theft. 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,” said Thomas Fattorusso, Special Agent In Charge at the Internal Revenue Service’s Criminal Investigation’s New York office, in a statement.
“Their insatiable greed led them to spend millions of dollars on their own lavish desires. Today, no luxury vehicles or sprawling real estate can protect them from the consequences of such crimes,” said Ivan Arvelo, Special Agent in Charge of Homeland Security Investigations in New York.
The U.S. Securities and Exchange Commission also filed civil charges against Karony, Smith and Nagy in U.S. District Court in Eastern New York. The complaint charges them with six counts of fraud related to the scheme laid out by the U.S. Attorney’s Office, and the unregistered sale of SafeMoon tokens.
On Thursday, Karony’s attorney filed a motion for pre-trial release.
Karony “presents no risk of flight, let alone a ‘serious’ risk as required by the Bail Reform Act, nor does he present a danger to the community. Accordingly, the Bail Reform Act directs the Court to release Mr. Karony on his personal recognizance,” court documents read.
Correction: An earlier version misspelled the last name Braden Karony’s attorney, Clayton Simms, as Sims.
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