[NEWS] SEC indicts SafeMoon executives on fraud charges

On the 1st, the SEC (U.S. Securities and Exchange Commission) announced that it had indicted three executives of SafeMoon, the company described as "TikTok's meme coin," on charges of fraud and selling unregistered securities.

According to the Department of Justice, the three indicted were Kyle Nagy, founder of SafeMoon LLC, CEO John Karony, and CTO Thomas Smith. Two of the executives were arrested on the 1st. Nagy is currently on the run.

The charges are that SafeMoon executives misappropriated more than $200 million (about 30 billion yen) from the project for personal use.

Safemoon issues the cryptocurrency SFM as a DeFi platform, and although its price rose by 55,000% in a short period from March 12 to April 20, 2021, it has a history of crashing just before reaching a market capitalization of $5 billion (approximately 752 billion yen).

It is said that the company introduced a system called "static rewards" that charges a 10% fee when selling, and 5% of the 10% fee generated by Safemoon transactions was distributed to Safemoon holders, and the remaining 5% was added to PancakeSwap's liquidity pool.

However, according to U.S. Attorney Breon Peace, the defendants had access to Safemoon's liquidity pool and appear to have intentionally diverted and used millions of dollars' worth of tokens from the liquidity pool for personal gain. In fact, the company was not operating as announced by the company.

The price crash of SFM is said to be due to a vulnerability found in the code of the smart contract, as well as a "pump and dump" scam in which worthless assets (tokens) were raised for a short period of time and then sold at a low price.

Dealing with the ongoing cryptocurrency fraud remains a deep-rooted challenge in this field.

Reference:Announcement
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