SafeMoon accused of securities fraud in SEC lawsuit
Yet another executive team facing charges for misusing investor funds on a luxury lifestyle
DIAMOND VISUALS/Shutterstock modified by Blockworks
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.
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