The Securities and Exchange Commission has charged SafeMoon LLC, founder Kyle Nagy, SafeMoon US LLC, its CEO John Karony, and CTO Thomas Smith, for fraud through the unregistered sale of a crypto asset security.
Simultaneously, criminal charges were filed in the US Attorney’s Office for the Eastern District of New York. The indictment was unsealed today. The criminal charges include allegations of conspiracy to commit securities fraud, conspiracy to commit wire fraud, and money laundering conspiracy in defrauding investors. The AG describes the crime as a “rug pull.”
Karony was arrested in Provo, Utah, and Smith was arrested in Bethlehem, New Hampshire and Nagy remains at large, according to the DOJ.
The SEC’s complaint claims the defendants promoted the offering by stating the coin offering would go safely to the moon.
At the same time, allegedly, the defendants took $200 million from the initiative and used funds for personal expenditures. The valuation was, at one point, around $8 billion.
“As alleged, the defendants deliberately misled investors and diverted millions of dollars to fuel their greedy scheme and enrich themselves by purchasing a custom Porsche sports car, other luxury vehicles and real estate,” stated United States Attorney Breon Peace. “As fraudsters increasingly use digital assets to mislead investors and misappropriate funds, our Office will be at the forefront of pursuing them and their ill-gotten gains. We will continue our focus in the digital asset space and bring those who defraud investors in this area to justice.”
The SEC states that the Defendants misappropriated millions of dollars to purchase McClaren cars, extravagant travel, luxury homes, and other things.
“Decentralized finance claims to deliver transparency and predictable outcomes, but unregistered offerings lack the disclosures and accountability that the law demands, and they attract scammers like Kyle Nagy, who use these vulnerabilities to enrich themselves at the expense of others,” said David Hirsch, Chief of the SEC Enforcement Division’s Crypto Assets and Cyber Unit (CACU).