SafeMoon accused of securities fraud in SEC lawsuit

Yet another executive team facing charges for misusing investor funds on a luxury lifestyle

article-image

DIAMOND VISUALS/Shutterstock modified by Blockworks

share

The Securities and Exchange Commission filed a lawsuit against SafeMoon and some of its top officials on Wednesday 

The SEC accused SafeMoon, creator Kyle Nagy, CEO John Karony and CTO Thomas Smith of “perpetrating a massive fraudulent scheme through the unregistered sale of the crypto asset security, SafeMoon.”

The complaint, filed in the U.S. District Court for the Eastern District of New York, alleges that Nagy falsely assured investors that the token would be locked in the liquidity pool, however “large portions” of the pool were “never locked.”

“Critically, Nagy represented in marketing materials, his whitepaper, and website that these retained assets would be ‘locked’ and inaccessible for at least four years. Smith and Karony repeated and disseminated these false representations in social media posts and other communications with the public,” the complaint said.

Karony, Smith and Nagy then “misappropriated millions of dollars to purchase McClaren cars, extravagant travel, luxury homes, and other things.”

After this plunge, Karony and Smith allegedly used misappropriated assets to make large purchases of SafeMoon to prop up its price and manipulate the market. Karony also allegedly used an account he opened on a trading platform to buy and sell SafeMoon to create the impression of market activity, a practice known as wash trading,” the SEC complaint said.

The SEC alleges that the SafeMoon token falls under the Howey test’s definition of a securities offering because the investors “reasonably expected profits or returns derived from the entrepreneurial or managerial efforts of others.”

The regulatory agency has engaged in a legal crackdown of crypto companies in the past year, targeting both Binance and Coinbase in lawsuits earlier this summer.

However, they’ve also faced some pushback from the courts, with Ripple scoring a partial win in the SEC’s case against the company. The judge ruled that the programmatic sales of XRP didn’t constitute security sales.

SafeMoon did not immediately respond to a request for comment.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Research Report Templates.jpg

Research

The L2 ecosystem has evolved into a complex landscape, with over $17B in market value and $50B in secured assets. While traditionally seen as high-beta plays on Ethereum, no L2 token achieved a beta higher than 1.0 relative to ETH in 2024. Furthermore, token dilution significantly impacted the sector, with a 1% increase in circulating supply corresponding to a 1.4% decrease in returns.

Key figures including Vitalik Buterin struggle to communicate the network’s core mission in an era of memecoin-minimized attention spans

article-image

World Liberty Financial has been busy buying crypto ahead of its launch

article-image

Trump’s token is setting the “tone” for crypto, Empire co-host Santiago Santos said

article-image

A pair of fundraises by Tapestry and Oh both came with expansive ideas about the future of AI and the role of humans in it

article-image

The Calamos Bitcoin Structured Alt Protection ETF — January is set to offer “systematic risk management” across its roughly one-year outcome period

article-image

Crypto industry elites (and a journalist or two) donned black tie at the Crypto Ball Friday night