SafeMoon files for Chapter 7 bankruptcy after exec arrests, SEC charges

DeFi protocol SafeMoon filed for Chapter 7 bankruptcy protection on Thursday after the U.S. securities watchdog last month charged the firm for alleged fraud.

SafeMoon filed the voluntary petition for bankruptcy to the United States Bankruptcy Court in the District of Utah on Thursday. The document was signed by chief restructuring officer Kenneth Ehrler.

The filing shows that the firm, SafeMoon US LLC, has estimated assets in the range of $10 million to $50 million and estimated liabilities of $100,001 to $500,000.

The news comes after the Securities and Exchange Commission last month charged the firm and its executive team for alleged fraud and unregistered offering of crypto securities. The agency said SafeMoon’s three executives — Kyle Nagy, John Karony and Thomas Smith — failed to deliver promised profits and misappropriated investor funds for their own personal use. 

Karony and Smith were arrested last month, while Nagy remained at large. “As alleged, the defendants lied to SFM investors concerning whether SFM’s use of ‘locked’ liquidity was inaccessible to the defendants, as well as their personal holding and trading of SFM,” prosecutors said. “As SFM’s market capitalization grew to more than $8 billion, the defendants fraudulently diverted and misappropriated millions of dollars’ worth of purportedly ‘locked’ SFM liquidity for their personal benefit.”

SafeMoon token fell 14.4% over the past 24 hours as of Friday noon in Asia, according to data from CoinGecko.

Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.

© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.