Yesterday, the SEC opened a case against crypto project Safemmon, citing its executives of concocting a massive fraudulent scheme through the sale of unregistered securities, causing billions of dollars in losses to US investors.
On the same day, the DOJ, following the regulator’s investigation, arrested Safemoon’s CEO and CTO for wire fraud, securities fraud, embezzlement, and money laundering.
Specifically, high-ranking members of the Safemoon team allegedly used $200 million of investor property to purchase luxury cars and homes after they described the same funds as “locked”.
As a result of this affair, the SFM token plummeted 60% to its lowest value ever. Are we at the end of the line for this shitcoin?
Let’s see all the details below.
SEC and DOJ charge Safemoon team with fraud and embezzlement: the CEO and CTO of the crypto project are in trouble
Bad news for Safemoon and its team: the Securities and Exchange Commission (SEC) has opened a civil case against the executives of the crypto project, accusing them of selling unregistered securities and defrauding investors.
The US Department of Justice (DOJ), following the federal market regulator’s case, proceeded to arrest Braden John Karony and Thomas Smith, CEO and CTO of Safemoon, respectively.
Kyle Nagy, founder of the cryptographic token, however, remains at large.
Three counts each were filed in New York for the criminal gang for conspiring to commit securities fraud, wire fraud, and money laundering.
According to documents filed by the SEC, it can be seen that Safemoon executives had concocted a massive fraudulent scheme, robbing investors of their crypto.
Specifically, in 2021 they had lied to their community by declaring that the funds deposited in Safemoon’s pools were locked and inaccessible when in fact they had been spent on buying cars and luxury goods.
In total, the amount misappropriated by cryptocurrency executives amounted to $200 million.
In a memo from Breon Peace, U.S. Attorney for the Eastern District of New York, we can read that:
“As alleged, the defendants deliberately misled investors and diverted millions of dollars to fuel their greedy scheme and enrich themselves by purchasing a customized Porsche sports car, other luxury vehicles and real estate.”
The Justice Department went on to say that SafeMoon executives used “complex transaction routing and centralized pseudonymous trading accounts” to disguise their activities.
They themselves had promised investors that the price of their cryptocurrency would go “to the moon” and that its features would “push the price to stratospheric all-time highs,” when in fact things turned out very differently.
As icing on the cake now John Karony, Thomas Smith and Kyle Nagy,while facing heavy criminal charges, also have to deal with the civil suit filed by the SEC for selling unregistered securities.
David Hirsch, head of the SEC Enforcement Division’s Crypto Assets and Cyber Unit, said in the case against Safemmon:
“Unregistered offerings lack the information and accountability required by law and attract fraudsters like Kyle Nagy, who use these vulnerabilities to enrich themselves at the expense of others.”
The ball is now in the U.S. federal courts, which will set a final penalty for the criminal computer group. Safemoon’s founder, currently a fugitive, will likely receive the harshest sentence as soon as he is caught.
As reported by Reuters, SEC Chairman Gary Gensler commented on the news saying that speculative excesses in the cryptocurrency market such as in the Safemoon case undermine investor confidence in the U.S. capital markets.
Safemoon token (SFM) price analysis
After the SEC lawsuit and the arrest of Safemoon’s executives, things are now looking bad for the SFM coin, which yesterday saw a drop of more than 60% in its value in the crypto markets.
The cryptocurrency was launched in March 2021 and immediately attracted investors’ attention thanks to a strong marketing campaign launched by the project team.
At that time, coins that offered an economic incentive to holders financed through a tax applied to all purchases and sales that took place with them were beginning to become popular.
For Safemoon in particular, token holders received an additional SFM fee equal to 5 percent of the value traded by traders (half of the 10% total fee)
This feature, combined with the “shilling” technique by which various crypto influencers went about spreading optimism to their followers about the future of this cryptocurrency, led to an explosion in its price in 2021
At its all-time high in January 2022, Safemmon’s crypto had reached a total capitalization of $8 billion for a price of $0.00338272 per unit.
After news of the DOJ and SEC charges emerged, its price dropped to $0.00009 bringing its market capitalization to just $42 million.
Yesterday’s red candle was a heavy one: in no time at all, the value of the Safemoon token reached annual lows, breaking any existing support and sending the RSI from overbought to oversold in a flash.
In less than 24 hours about $60 million evaporated in the shitcoin market.
At this point the most outlandish comments appeared among the X community regarding the future price action of crypto.
Some even (jokingly) suggested “buying the dip” after SFM collapsed by more than half its value.
Given the violence of the bearish movement, a rebound of the price is not ruled out: however, opening a long position now is really risky and could lead to large losses if things do not go right.
Unfortunately, or fortunately, Safemoon (SFM) will no longer reach the exorbitant prices of 2021 and will eventually be forgotten by crypto investors.
We are at the end of the line for this shitcoin, which during the last bullish market made several degens millionaires but also ruined a long list of people who bought it in 2022.
What happened yesterday serves as a lesson for serial bettors in the crypto market, who have yet to understand what “value investing” means and that achieving wealth quickly with these kinds of “garbage coins” is not the best path to pursue.
Much better to focus on the coins that really bring value to the market and have a technological background with real use cases.
Finally, and much more importantly: in this world it is crucial to be patient and not aim to get rich with little capital and in a short time.