Safemoon Founders Arrested, Dave Portnoy Admits Token Is “Ponzi Scheme”

Ironically, a project with “safe” in its name proved to be a fraudulent scheme with the founders of the SafeMoon crypto token, John Karony, Kyle Nagy, and Thomas Smith, formally arrested by the US government. Their apprehension by the Department of Justice (DOJ) comes in response to charges issued by the US Securities and Exchange Commission (SEC) earlier Wednesday.

In an official announcement from the US Attorney’s Office of the Eastern District of New York, the executives now face allegations of being involved in a “multi-million dollar international fraud scheme.” Notably, Nagy, Karony, and Smith held the positions of CEO, founder, and chief technology officer within the company, respectively.

“As alleged, the defendants deliberately misled investors and diverted millions of dollars to fuel their greedy scheme and enrich themselves by purchasing a custom Porsche sports car, other luxury vehicles and real estate,” stated United States Attorney Peace.

Special Agent Ivan Arvelo also added that based on the allegations, SafeMoon’s executives grew their company value to over $8 billion, but instead of rewarding their clients as promised, “their insatiable greed led them to spend millions of dollars on their own lavish desires.”

The SEC had initially revealed charges against the SafeMoon executive team earlier in the day, citing their involvement in defrauding investors and misappropriating funds. Consequently, the founders of the crypto token were targeted for apprehension by authorities.

“Decentralized finance claims to deliver transparency and predictable outcomes, but unregistered offerings lack the disclosures and accountability that the law demands, and they attract scammers like Kyle Nagy, who use these vulnerabilities to enrich themselves at the expense of others,” said David Hirsch, Chief of the SEC Enforcement Division’s Crypto Assets and Cyber Unit (CACU).

The US government’s move to arrest the SafeMoon crypto token founders is a direct response to the allegations of their involvement in a colossal fraud scheme. The official statement from the US Attorney’s Office highlights how they “misappropriated millions of dollars of investor funds” for their own personal gain.

It is worth noting that the three founders allegedly used these ill-gotten gains to acquire “luxury vehicles, real estate, and personal investments.” As per the SEC’s complaint, Nagy, in his promotion of the SafeMoon Token, provided assurance to investors that the funds were securely locked within SafeMoon’s liquidity pool, rendering them inaccessible to anyone, including the defendants.

This liquidity pool comprises investor funds that serve the purpose of enhancing asset trading liquidity. However, the allegations assert that significant portions of the liquidity pool were never actually locked, and the Defendants unlawfully diverted millions of dollars towards the purchase of high-end assets such as McLaren cars, extravagant travel, luxury homes, and various other expenditures.

Moreover, Karony, Nagy, and Smith are facing charges of “conspiracy to commit securities fraud, conspiracy to commit wire fraud, and money laundering” in connection with their roles in this fraudulent scheme.

The official release mirrors the concerns raised by the SEC, particularly in relation to the false claims made by SafeMoon executives regarding locked liquidity. Among the three founders, Nagy is reported to be evading authorities, while Karony and Smith have both been apprehended earlier today.

Barstool Sports founder Dave Portnoy took to X his frustration on the fraudulent crypto project, saying it “turns out it was a ponzi scheme after all.” Portnoy, who has invested in Safemoon, saw his investment crash by over 94% back in August 2022, but saying he’s still holding.

Nevertheless, he found himself being sued by investors for “shilling SafeMoon,” which he responded to by saying he “didn’t get a nickel from Safemoon” and he’s the only one “who loses all his money in Safemoon and gets sued for it.”

A month after, the investors suing filed for his dismissal from the lawsuit against him for allegedly promoting the SafeMoon token.

Another personality that Safemoon dragged in its schemes is DeAndre Cortez Way, more popularly known as Soulja Boy. Way was named as a defendant, along with Jake Paul, Nick Carter, Lil Yachty, and Ben Phillips in a class-action lawsuit filed against the cryptocurrency firm SafeMoon on February 18, 2022. The suit alleged the company is a pump-and-dump scheme for promoting the SafeMoon token on their social media accounts with misleading information.

Information for this briefing was found via WatcherGuru, Cointelegraph, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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