SafeMoon CEO Convicted in Multi-Million Dollar Crypto Fraud Scheme
Braden John Karony faces up to 45 years imprisonment. Source: CoinGape
A federal jury in Brooklyn, New York has convicted Braden John Karony, the former Chief Executive Officer of cryptocurrency company SafeMoon LLC, on all counts of a three-count indictment including conspiracy to commit securities fraud, wire fraud, and money laundering. The verdict comes after a comprehensive 12-day trial presided over by United States District Judge Eric R. Komitee and marks one of the most significant cryptocurrency fraud cases to date.
Karony, 29, now faces up to 45 years in prison for his role in what prosecutors described as an elaborate scheme to defraud investors of millions of dollars. The jury also ordered the forfeiture of approximately $2 million in assets, including a residential property in Utah and proceeds from another luxury real estate sale.
The Verdict Details
After less than a day of deliberations, the jury found Karony guilty on all three charges filed against him. The case, handled by the Office’s Business and Securities Fraud Section in the Eastern District of New York, presented overwhelming evidence of Karony’s involvement in diverting investor funds for personal use.
United States Attorney Joseph Nocella stated, “As proven at trial, the SafeMoon digital asset was anything but safe and turned out to be pie in the sky for investors who were deliberately misled by Karony, a man who sought to get rich quick by stealing and diverting millions of dollars.”
SafeMoon logo promised security but delivered fraud. Source: Wikipedia
The SafeMoon Scheme Explained
SafeMoon tokens were digital assets first issued in March 2021 by SafeMoon LLC on a public blockchain. The platform implemented an unusual 10% transaction tax system, where 5% was supposedly redistributed to all token holders and the other 5% directed to “locked” liquidity pools to maintain market stability.
At its peak, SafeMoon’s market capitalization exceeded $8 billion, attracting thousands of retail investors hoping to profit from the emerging cryptocurrency market. The project’s rapid growth was fueled by promises of secure investments through “locked” liquidity pools that would prevent token developers from conducting a “rug pull” – a type of crypto fraud where creators abandon a project after taking investor funds.
“In reality, Karony and his co-conspirators retained access to the SafeMoon liquidity pools and used that access to intentionally divert and misappropriate millions of dollars’ worth of tokens for their personal benefit,” according to the Department of Justice statement.
How the Fraud Was Committed
Court evidence revealed that Karony and his associates misrepresented several material aspects of the SafeMoon offering. They falsely claimed that the liquidity pools were “locked,” preventing executives from accessing funds, while maintaining full access and regularly withdrawing funds for personal use.
Prosecutors demonstrated that Karony acquired over $9 million in crypto assets from the scheme, using the proceeds to purchase luxury vehicles including a $277,000 Audi R8 sports car, another Audi R8, a Tesla, and custom Ford F-550 and Jeep Gladiator trucks. He also acquired multiple properties, including a $2.2 million home in Utah and additional real estate in Kansas.
To conceal their activities, Karony and his co-conspirators employed sophisticated methods including numerous private un-hosted crypto wallet addresses, complex transaction routing, and pseudonymous centralized exchange accounts.
Crypto fraud cases increasingly reaching federal courts. Source: WIRED
Key Players in the Case
The case involved three key figures from SafeMoon’s leadership team:
- Braden John Karony: Former CEO of SafeMoon, now convicted on all charges
- Thomas Smith: Former Chief Technology Officer, who pleaded guilty and testified as a cooperating witness during the trial
- Kyle Nagy: SafeMoon’s creator who remains at large and is believed to have fled to Russia
Smith’s testimony provided crucial insights into the inner workings of the scheme. During court proceedings, Smith admitted that his moral compass had been compromised, stating: “Previously to all of that, I had a very strong moral compass. After I had the money, I stopped asking questions […] I became that monster I was talking about.”
Financial Impact and Assets Seized
The fraudulent scheme had devastating consequences for numerous investors who believed in the project’s legitimacy. According to court documents, the jury ordered the forfeiture of one residential property and the proceeds from the sale of another, amounting to approximately $2 million.
FBI Assistant Director in Charge Raia commented on the case: “Braden Karony, the CEO of SafeMoon, exploited his company’s digital portfolio with fictional success stories and stole millions of dollars in crypto-assets to finance luxury purchases. Along with his co-conspirators, Karony violated his clients’ trust and wallets while attempting to conceal his misconduct through discreet transactions.”
Broader Implications for Cryptocurrency Industry
The SafeMoon case represents part of a broader trend of increased regulatory scrutiny and enforcement actions within the cryptocurrency sector. Recent high-profile cases involving executives from FTX, Celsius, and Terraform Labs demonstrate regulators’ growing willingness to pursue fraudulent activities in digital asset markets.
The conviction sends a strong message to other cryptocurrency operators about the serious consequences of misleading investors. It also highlights the importance of due diligence for crypto investors in an industry still working to establish regulatory standards.
Harry T. Chavis, Jr., Special Agent in Charge at IRS Criminal Investigation, emphasized this point: “While the name of his company is SafeMoon, there was nothing safe about this investment that was just a front for theft. By following the money with complex cryptocurrency tracing, IRS-CI New York’s Cyber and J5 groups worked with our investigative partners to see that this conman is held accountable for his greedy acts.”
What’s Next
While Karony awaits sentencing and potentially faces up to 45 years in prison, legal experts suggest the final sentence may be less severe but will likely serve as an important precedent in cryptocurrency fraud cases.
Thomas Smith, who pleaded guilty earlier this year, is also awaiting sentencing. Meanwhile, international law enforcement agencies continue their efforts to locate Kyle Nagy, the third co-conspirator who remains at large.
SafeMoon filed for Chapter 7 bankruptcy in December 2023, and its remaining assets were acquired by the VGX Foundation, which has distanced itself from the previous management. Investors who suffered losses have initiated numerous civil lawsuits and class-action claims against the company and its executives, seeking to recover some portion of their investments.
Conclusion
The conviction of Braden John Karony marks a significant moment in the ongoing effort to establish accountability in cryptocurrency markets. As digital assets continue to evolve and attract mainstream attention, cases like SafeMoon serve as stark reminders of the risks involved and the importance of transparent operations.
For retail investors, the case highlights the critical importance of thorough research before investing in cryptocurrency projects, particularly those making bold claims about security and guaranteed returns. As HSI New York Acting Special Agent in Charge McCormack noted: “Whether it involves fiat or crypto, HSI New York’s El Dorado Task Force will relentlessly pursue individuals intent on exploiting investors and the American financial system for their own gain.”
With Karony’s sentencing pending and ongoing investigations into other cryptocurrency fraud cases, the industry faces a period of reckoning that could ultimately lead to stronger investor protections and more stable digital asset markets.
