The founders and executives of digital asset company Safemoon have been charged in a multimillion-dollar international fraud scheme. The defendants allegedly misappropriated millions of dollars of investor funds for their own use, including the purchase of luxury vehicles, real estate and personal investments.
Arrests and charges
Two men from SafeMoon LLC, Braden John Karoni and Thomas Smith, were arrested in Provo, Utah and Bethlehem, New Hampshire, respectively. The defendants were accused of participating in a scheme to defraud investors in SafeMoon. On the other hand, the cryptocurrency issued by SafeMoon LLC gained great popularity and its market value exceeded $ 8 billion.
The accusations revolved around allegations that the defendants misled SafeMoon investors. Allegedly, the defendants misrepresented access to “locked” liquidity that they allegedly could not access. He was also accused of embezzling and misusing millions of dollars from a liquidity pool for personal gain.
SafeMoon tokens (SFM) were introduced to the public blockchain by SafeMoon LLC in March 2021.
A unique feature of SFM transactions was that a 10 percent tax was imposed, with 5 percent allocated to SFM holders and the other 5 percent allocated to specific liquidity pools.
The larger the liquidity pool, the greater the liquidity in the SFM market. It quickly had more than a million owners and a market cap of more than $8 billion.
SafeMoon founders’ fraud scheme
According to the indictment, the United States Attorney’s Office for the Eastern District of New York alleged that the defendants made false statements to investors, including the use of “locked” liquidity pools, to avoid pulling the rug.
He also claimed that the tokens in the liquidity pool will not be used for personal enrichment. However, the defendants maintained access to the liquidity pool and knowingly misappropriated and embezzled millions of dollars worth of tokens for their personal gain.
They were accused of trading SFM for their own benefit and making significant profits even at the peak of SFM’s market price. The defendants concealed the movement of these funds in a variety of ways, including unhosted private crypto wallets and fake centralized exchange accounts. The embezzled money was allegedly used to purchase luxury vehicles and real estate in various states.
On the other hand, the accusations in the indictment are mere allegations and the defendants will be considered innocent until proven guilty in court. The case is being prosecuted by the U.S. Attorney’s Office’s Business and Securities Fraud Section.