SafeMoon Goes Bankrupt As Execs Face Criminal Charges

Crypto platform SafeMoon filed for Chapter 7 bankruptcy on Thursday as company executives have been charged with wire fraud and money laundering among other crimes, CoinDesk reported, citing a Utah Bankruptcy Court filing.

SafeMoon holds between $10 million and $50 million in assets, has between 50 and 99 creditors, and owes between $100,000 and $500,000 according to the filing.

The implications of Chapter 7 bankruptcy

Chapter 7 bankruptcy is a legal process that allows entities to discharge or eliminate most of their existing debts. It is a form of liquidation bankruptcy, which means that the debtor’s non-exempt assets may be sold or liquidated to pay off creditors, and any remaining qualifying debts are typically discharged.

In Chapter 7, a bankruptcy trustee is appointed to review the debtor’s assets and sell non-exempt property to repay creditors. It differs from a Chapter 11 bankruptcy in that there’s usually no intent to restructure and relaunch the debtor company.

Chapter 11 is often more complex and expensive compared to Chapter 7, making it more suitable for larger businesses with the resources to navigate the process.

Arrests of executives preceded the filing

In November, US officials arrested SafeMoon’s top executives and charged them with conspiring to commit wire fraud, securities fraud, and money laundering. Allegedly, CEO John Karony, CTO Thomas Smith and SafeMoon founder Kyle Nagy stole millions of dollars from investors and deceived them.

Specifically, Karony and Smith were accused of withdrawing more than $200 million to buy luxury properties and vehicles using funds that they told customers were “locked” according to the Department of Justice.

Nagy has been charged with these crimes, but he has not been arrested yet.

SafeMoon has also been sued by the US Securities and Exchange Commission (SEC) over allegedly violating fraud and securities laws.