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Safemoon Files for Chapter 7 Bankruptcy Month After SEC Charged Founders With Fraud
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Source: PixabayDecentralized finance protocol SafeMoon has officially filed for Chapter 7 bankruptcy protection in the face of mounting allegations of fraud and mismanagement.
The company’s founders Kyle Nagy, Thomas Smith, and Braden Karony, accused of misleading investors, are facing a $200 million SEC lawsuit for securities fraud.
The bankruptcy filing comes after a tumultuous period marked by accusations of a carefully orchestrated scheme of deception and manipulation that fueled SafeMoon’s rapid ascent.
SEC has alleged that investors were given false assurances about the safety of their funds in the company’s liquidity pool, which, contrary to representations, could be withdrawn.
Safemoon Accused of Offering Unregistered Securities
The U.S. Securities and Exchange Commission (SEC) dealt a significant blow to SafeMoon in November 2023 by filing a civil suit against Nagy, Smith, and Karony.
The lawsuit alleges a colossal securities fraud scheme, asserting that the trio raised over $200 million through unregistered securities offerings and misappropriated substantial sums for personal use.
Chief Restructuring Officer Kenneth Ehrler, in an internal communication to SafeMoon employees, announced the bankruptcy filing, concurrently terminating all employment contracts with immediate effect. Employees were instructed to file claims for unpaid wages and benefits with the bankruptcy court.
Safemoon Token Dumps Following Bankruptcy News
The native crypto Safemoon fell from $0.000065 to $0.000045 over a five-hour period after the news. However, the price of the cryptocurrency recovered soon after.
At the time of writing, Safemoon is changing hands at $0.000059, a 9% decline in the last 24 hrs, as per Coingecko data.