A federal jury convicted former SafeMoon Braden John Karony on all charges in a crypto fraud scheme that siphoned millions from investors under false promises of decentralized finance security.

The jury found Karony guilty of conspiracy to commit securities fraud, wire fraud, and money laundering after a 12-day trial in Brooklyn on May 21.

Prosecutors accused Karony of lying to investors about SafeMoon’s locked liquidity pools while secretly accessing and draining the funds to buy luxury homes and vehicles.

Karony now faces up to 45 years in prison. Jurors also ordered the forfeiture of approximately $2 million in real estate assets linked to the scheme. His sentencing is scheduled for later year.

Meanwhile, co-conspirator Thomas Smith previously pleaded guilty and is also awaiting sentencing, while Kyle Nagy, the third alleged participant, remains at large.

Meanwhile, the SafeMoon project has been taken over by the community which has rebranded it as a memecoin.

Karony orchestrated a deceptive scheme

Karony and his co-conspirators launched SafeMoon in March 2021, marketing it as a secure DeFi token with a self-sustaining liquidity mechanism.

They claimed a 10% tax on every transaction would reward holders and reinforce market liquidity by funding locked pools. In reality, Karony retained full access to those liquidity pools and funneled millions of dollars into personal accounts.

He used the stolen funds to purchase a $2.2 million home in Utah, properties in Kansas, two Audi R8s, a Tesla, and customized trucks.

According to US Attorney Joseph Nocella:

“Karony didn’t build a safe financial product — he built a pipeline for theft. He looted investor funds and used them to fill his garages and bankroll his lifestyle.”

Agents from the IRS-Criminal Investigation, FBI, and Homeland Security Investigations traced the misappropriated assets through a web of pseudonymous wallets and centralized exchange accounts.

Complex crypto trail

IRS-CI and its cyber and J5 task forces followed the digital trail, uncovering how Karony laundered the funds. They collaborated with global enforcement partners from Australia, Canada, the Netherlands, and the UK to crack the cross-border operation.

IRS-CI Special Agent in Charge Harry T. Chavis, Jr. said:

“Karony lined his driveways with sports cars while deceiving millions. We tracked his crypto movements and exposed the scheme for what it was — outright theft.”

The FBI and HSI also confirmed Karony masked his personal trades of SafeMoon during peak prices, generating additional illegal profits while assuring the public that insiders weren’t manipulating the token.

Mentioned in this article

The SafeMoon team is planning on launching a memecoin on Solana (SOL) on Saturday at 1:00 AM UTC.

The team has burned 2.2 trillion SFM tokens across the Ethereum, Polygon and Binance Smart Chain networks, the VGX Foundation told CoinDesk.

In total, almost the entirety of the Ethereum and Polygon supplies have been eliminated, as well as roughly 60% of the Binance Smart Chain supply.

SFM holders will be given the opportunity to exchange their SFM tokens for the SafeMoon memecoin through the VGX wallet.

“We are going to allow the community to swap their tokens so people can get out of their positions,” VGX said.

The hope, the firm said, is for the new token to be listed on exchanges again and for liquidity to increase sufficiently for community members to recuperate some of their funds.

SafeMoon was one of the most popular projects of the 2021 crypto bull market. Its token rose to a $17 billion market capitalization at its highest point, but now floats at roughly $41 million in market cap, according to CoinGecko, and has been delisted from almost every exchange.

SafeMoon’s old executive team was charged by the Department of Justice with perpetrating fraud on its investors in 2023. They were notably accused of withdrawing more than $200 million from supposedly locked funds to buy luxury cars and homes.

The company declared bankruptcy in December 2023 and was subsequently acquired by the VGX Foundation.