On November 1, 2023, the United States Department of Justice announced the unsealing of an indictment charging Braden John Karony, Kyle Nagy, and Thomas Smith with conspiracy to commit securities fraud, conspiracy to commit wire fraud and money laundering conspiracy for their roles in defrauding investors in a decentralized finance digital asset called “SafeMoon” (SFM).
According to the indictment, the defendants, who issued SFM in March 2021, misrepresented to investors various material aspects of the SFM offering, including that SFM relied on “locked” liquidity pools that prevented the defendants and other insiders at SafeMoon from being able to “rug pull” SFM investors and that the developers were not holding and trading SFM for their benefit.
In reality, the defendants allegedly retained access to the SFM liquidity pools and they used that access to intentionally divert and misappropriate millions of dollars’ worth of tokens from the SFM liquidity pools for their personal benefit generating millions of dollars in profits. The defendants attempted to mask their movement of the fraudulent proceeds via numerous un-hosted crypto wallet addresses, complex transaction routing, and multiple centralized exchange accounts.
According to the indictment, the defendants used some of these proceeds to purchase luxury vehicles and real estate. Smith, for example, using cryptocurrency addresses he controlled, sent 2,900 Binance Coin (BNB) worth more than approximately $860,000 and traceable to the SFM liquidity pool to a third party’s cryptocurrency address in order to purchase a custom Porsche 911 sportscar and non-fungible token.
“Although this fraud scheme may be complex, the end result is simple—theft. Investors were assured their money would be safe while the defendants allegedly misled investors and diverted millions of dollars to line their pockets and their driveways. Through cryptocurrency tracing and good old-fashioned police work, IRS-CI New York’s Cyber and J5 groups worked with our investigative partners to track the millions in diverted funds and arrest the perpetrators of this con,” stated IRS-CI Special Agent-in-Charge Thomas M. Fattorusso.
Congratulations to our partners at IRS-Criminal Investigations, FBI, Homeland Security Investigations and the Department of Justice.
Access our coverage of TRON, Solana and 23 other blockchains
Fill out the form to speak with our team about investigative professional services.