Decentralized finance protocol SafeMoon, has officially completed its Chapter 7 bankruptcy filing. This development triggered a sharp decline in the token price. However, the arrest of key members of the company by the US Department of Justice on charges of “fraud” seems to have taken things to a whole new level.
On December 14, SafeMoon filed for Chapter 7 bankruptcy, colloquially referred to as a “liquidation bankruptcy.” Attorney Mark Rose filed the voluntary petition in the United States Bankruptcy Court for the District of Utah. Additionally, Chief Judge Joel T. Marker was officially appointed to oversee the case.
The letter, shared by a user on Reddit, appears to indicate that the company’s failure to meet its employee wage obligations was the primary cause of the bankruptcy. The letter instructs employees to file a lawsuit in bankruptcy court to recover unpaid wages.
The latest development comes just a month after the United States Securities and Exchange Commission (SEC) filed criminal charges against SafeMoon, its founder Kyle Nagy, CEO John Karony and CTO Thomas Smith, for violating securities laws. The SEC called the company’s actions a “massive fraud scheme,” further diminishing investor confidence.
Following the bankruptcy filing, the price of SafeMoon’s native token dropped from $0.000065 to $0.000045. This drop occurred in a short five-hour period. Although it rose to $0.000061 in a short period of 10 minutes with an instant recovery, the price was negatively affected. This marks a significant decline of 98.2% from the peak value of $0.0033 on January 5, 2022. Its market cap, once $1 billion, has fallen to just $34.5 million.
Additionally, as of press time, SFM was trading at $0.00005906, down 13%.