SafeMoon has filed for Chapter 7 bankruptcy as a whirlwind of accusations of fraud and mismanagement surrounding the once-thriving protocol.
SafeMoon founders Kyle Nagy, Thomas Smith, and Braden Karony have been accused of wilfully misleading investors and face a $200 million SEC lawsuit for securities fraud.
SafeMoon Files For Bankruptcy
SafeMoon officially filed for Chapter 7 bankruptcy, also called “liquidation bankruptcy’ on the 14th of December in a filing to the United States Bankruptcy Court in the District of Utah. The petition was filed on behalf of SafeMoon by attorney Mike Rose, with Chief Judge Joel T. Marker assigned the case. A letter to employees purportedly written by SafeMoon’s Chief Restructuring Officer explained that the company’s bankruptcy run was why it could not pay employee wages before its bankruptcy filing.
“You will need to file a claim in the bankruptcy court for your unpaid wages.”
According to the United States Securities and Exchange Commission, SafeMoon executives wilfully misled investors about the accessibility of SFM’s “locked” liquidity. Instead, they utilized the funds for personal gains at a time when SafeMoon’s market capitalization soared to $8 billion. SafeMoon’s legal troubles were further complicated by the arrest of founders Braden Karony in Provo, Utah, and Thomas Smith in Bethlehem, New Hampshire. However, Kyle Nagy has still not been placed under arrest.
The United States Securities and Exchange Commission had charged SafeMoon, its founder Kyle Nagy, CEO John Carony, and CTO Thomas Smith for violating securities laws in what the SEC described as a “massive fraudulent scheme.”
SFM Price Tanks
As a result of the developments, the price of SafeMoons SFM token tanked, dropping from $0.000065 to $0.000045 over a five-hour period on the 14th of December, according to data from CoinGecko. However, the price did rebound to $0.000061. The cryptocurrency dropped by 31% following the bankruptcy filing. Currently, the token is trading at $0.000038, down by 42%. The token is down a staggering 98% from its all-time high of $0.0033, which it reached on the 5th of January, 2022.
Community Disillusioned
Former SafeMoon users and community members expressed their frustration on social media following the developments and the company filing for bankruptcy, alleging that SafeMoon developers orchestrated a rug pull. One frustrated user wrote on Reddit,
“The fact of the matter is, everyone has been scammed by the SafeMoon developers, including the mods that supported and trusted SafeMoon.”
Another user stated that SafeMoon had badly scammed him and several other users, commenting,
“Never wanna even talk about how bad we all got scammed and, especially the money I lost. To those that still think SafeMoon has a chance and will ‘go to the moon’: seek help.”
Santiago Melgarejo, a former non-fungible token analyst and sales specialist for SafeMoon, said that the warning signs were there all along, especially when many of the employees were abruptly fired despite working for a month without any pay.
Disclaimer: 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.
Source: https://cryptodaily.co.uk/2023/12/safemoon-files-for-chapter-7-bankruptcy-amidst-fraud-allegations