The specter of the US Securities and Exchange Commission continues to haunt the cryptocurrency market. This time, the SEC targeted the meme coin project Safemoon (SAFEMOON) and its developers. In an announcement on its website, the regulator accused crypto company SafeMoon and its executive team of fraud. He also accused the team of ‘offering unregistered crypto securities’.
SEC blames meme coin Safemoon this time
cryptokoin.comAs you follow from , the US Securities and Exchange Commission (SEC) is closely monitoring the cryptocurrency market and does not hesitate to file a lawsuit when it finds the opportunity. The SEC’s general approach towards the market is focused on ‘fraud’ and ‘unregistered securities’. As a result, he directs these accusations at projects that are on his radar. In a recent development, meme coin project Safemoon (SAFEMOON) and its team are on the SEC’s radar.
The SEC today charged SafeMoon LLC, its creator Kyle Nagy, SafeMoon US LLC, and the companies’ Chief Executive Officer John Karony and Chief Technology Officer Thomas Smith with operating a massive fraud scheme through the unregistered sale of a crypto asset security called SafeMoon. According to the SEC complaint, Defendants promised to raise the token price “Safely to the moon.” But instead of making a profit, they wiped out billions in market value. They withdrew more than $200 million worth of crypto assets from the Meme coin project. They also misappropriated investor funds for personal use. SEC Enforcement Division Crypto Assets and Cyber Unit (CACU) Chief David Hirsch made the following statement on the subject:
Decentralized finance claims to provide transparency and predictable results. But unreserved offers lack the disclosures and accountability required by law. This attracts scammers like Kyle Nagy, who use these vulnerabilities to enrich themselves at the expense of others.
What is the background of the complaint?
According to the SEC’s complaint, in marketing the SafeMoon Token, Nagy assured investors that the funds were securely locked and could not be withdrawn by anyone, including Defendants, while being held in SafeMoon’s liquidity pool, a collection of investor funds that provides liquidity to facilitate trading in the asset. However, it never locked up a large portion of its liquidity pool as it claimed. Additionally, Defendants embezzled millions of dollars to purchase McClaren cars, extravagant trips, luxury homes, and other items. CACU Vice President Jorge G. Tenreiro drew attention to the following points:
We urge investors to be extremely careful in this area as scammers take advantage of the popularity of crypto assets, promising astronomical profits and often only to see them crash.
Meme coin managers accused of ‘wash trading’
The SEC complaint states that SafeMoon’s price increased by more than 55,000% from March 12 to April 20, 2021. It also highlights that it reached a market cap of over $5.7 billion before its price dropped nearly 50% on April 20, 2021, when the public learned that SafeMoon’s liquidity pool was not locked as claimed. Following this decline, Karony and Smith allegedly used assets they had embezzled to make large purchases to raise SafeMoon’s price and manipulate the market. Karony also allegedly used an account he opened on a trading platform to buy and sell SafeMoon to create the appearance of market activity. This is a practice we know as ‘wash trading’.
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