Former SafeMoon CEO Convicted in $2 Million Crypto Fraud Scheme
A federal jury has found former SafeMoon CEO Braden John Karony guilty on all charges in a crypto fraud scheme that defrauded investors of millions of dollars under false promises of decentralized finance security. The jury’s verdict came after a 12-day trial in Brooklyn on May 21, where Karony was convicted of conspiracy to commit securities fraud, wire fraud, and money laundering.
Prosecutors alleged that Karony misled investors about SafeMoon’s locked liquidity pools, while secretly accessing and draining the funds to finance his lavish lifestyle, which included purchasing luxury homes and vehicles. Karony now faces a potential prison sentence of up to 45 years, with the forfeiture of approximately $2 million in real estate assets associated with the fraudulent scheme. His sentencing is scheduled for later this year.
Karony’s co-conspirator, Thomas Smith, has already pleaded guilty and is awaiting sentencing, while a third alleged participant, Kyle Nagy, remains at large. In the wake of the scandal, the SafeMoon project has been taken over by the community, who have rebranded it as a memecoin.
Karony and his partners launched SafeMoon in March 2021, promoting it as a secure DeFi token with a self-sustaining liquidity mechanism. They claimed that a 10% tax on every transaction would benefit holders and support market liquidity through locked pools. However, Karony retained full control of these liquidity pools, siphoning off millions of dollars for personal use.
The misappropriated funds were used to purchase a $2.2 million home in Utah, as well as properties in Kansas, luxury vehicles including two Audi R8s, a Tesla, and customized trucks. US Attorney Joseph Nocella remarked, “Karony didn’t create a safe financial product – he created a pipeline for theft. He embezzled investor funds to enrich himself.”
An investigation by the IRS-Criminal Investigation, FBI, and Homeland Security Investigations revealed the intricate web of pseudonymous wallets and centralized exchange accounts through which Karony laundered the stolen assets. The agencies collaborated with international enforcement partners from Australia, Canada, the Netherlands, and the UK to dismantle the cross-border operation.
IRS-CI Special Agent in Charge Harry T. Chavis, Jr. stated, “Karony flaunted his ill-gotten gains while deceiving millions. We followed his cryptocurrency transactions and exposed the fraud for what it was – pure theft.” The FBI and HSI confirmed that Karony disguised his personal trades of SafeMoon during peak prices, generating additional illicit profits while assuring the public that the token was not subject to insider manipulation.
Overall, the conviction of Braden John Karony marks a significant milestone in combating crypto fraud and upholding investor protection in the digital asset space. The case underscores the importance of due diligence and regulatory oversight in an industry prone to fraudulent schemes.