SEC Charges SafeMoon for offering unregistered securities

SEC Charges SafeMoon for offering unregistered securities

The United States SEC has charged SafeMoon, a Decentralized Finance (DeFi) platform and some of its executives in the U.S. District Court for the Eastern District of New York, for their involvement in a massive fraud scheme.

SEC Charges SafeMoon: the Allegations

Safemoon executives including its creator Kyle Nagy, the companies’ Chief Executive Officer (CEO) John Karony, the Chief Technology Officer Thomas Smith, and SafeMoon US LLC were all named as defendants in the lawsuit. According the terms of the SEC charges against SafeMoon, the defendants participated in the unregistered sales of the crypto asset security, “SafeMoon”.

According to the SEC filing, the SafeMoon executive team had earlier informed investors that their funds were safely locked away and could not be accessible to anyone including the “defendants”. This condition stands while the funds were held in the SafeMoon liquidity pool, per the agreement between the investors and SafeMoon. 

However, it turned out to be that a significant portion of the funds were never locked and tucked away. The executive team went ahead to withdraw almost $200 million in customer deposits from the project. The funds were allegedly misappropriated and plunged into the purchase of luxury vehicles, extravagant travel, luxury homes, and other personal properties for the officials. 

Chief of the SEC Enforcement Division’s Crypto Assets and Cyber Unit (CACU) David Hirsch, explained how unregistered offerings do not offer the disclosure and accountability that the law demands. Furthermore, he stated that such unregistered offerings often attract scammers like SafeMoon creator Kyle Nagy. These bad actors leverage the vulnerabilities discovered in these protocols to enrich themselves, not acknowledging the level of harm caused to their victims.

SEC Cautions Investors

As a warning, the SEC has urged investors to exercise extreme caution when investing their assets in the crypto sector, citing that many ongoing exploitations following the rising popularity and adoption of crypto tokens. Per the regulator, scammers promise investors enormous profits margins and the unsuspecting customers fall victim to the fraudulent schemes.

Notably, the misappropriation of customers deposits is somewhat similar to one of the charges levied against order FTX founder Sam Bankman-Fried. It is also worth mentioning that the SEC has pending legal cases against Coinbase and Binance for offering more prominent assets like Cardano (ADA) and Polygon (MATIC) as unregistered securities.

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Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture. Follow him on Twitter, Linkedin

The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.


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