Gate.io مدونة SafeMoon Initiates Chapter 7 Bankruptcy, SFM Plummets by 42%

SafeMoon Initiates Chapter 7 Bankruptcy, SFM Plummets by 42%

29 December 16:57

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## TL; DR

On 14 December <a href="/price/safemoon-sfm" target="_blank" class="blog_inner_link">SafeMoon</a> filed for chapter 7 bankruptcy. 
SafeMoon has no intention to revive the business and is winding down operations.

The SEC has charged SafeMoon executives with several crimes including violation of securities laws.

## Introduction

Since the beginning of 2022 several crypto projects have collapsed and filed for bankruptcy. Different blockchain-based firms like FTX filed for bankruptcy at the beginning of 2022. In another sad development, SafeMoon recently filed for Chapter 7 bankruptcy. Today, we discuss the possible causes of SafeMoon’s insolvency.

## SafeMoon Files for Chapter 7 Bankruptcy

On 14 December 2023 the Safemoon price fell by about 42% following the firm’s filing for Chapter 7 bankruptcy to the United States bankruptcy Court for the District of Utah. Attorney Mark Rose filed the voluntary petition as the crypto firm faced dire financial constraints.

On the day Safemoon crypto firm filed for Chapter 7 bankruptcy its token price dropped by about 31% within just 5 hours. Specifically, the [SFM token price](https://www.gate.io/price/safemoon-sfm "SFM token price") plummeted from $0.000065 to $0.000045. Nevertheless, at the end of the day it rebounded to $0.000061.

The Safemoon falling price resulted in the token trading at about 98.2% lower than its highest price of $0.0033, attained on 5 January 2022. Worse still, its market capitalisation tumbled from over $1 billion to $34.5 million.

The main reason for Safemoon crypto firm Chapter 7 filing is to pay off its creditors. The company claims that it has between 50 and 99 creditors it owes amounts that range between $10 million and $50 million in assets. It also has between $100,000 and $500,000 outstanding cash payments.

Chapter 7 bankruptcy results in liquidation of the debtors’ assets to repay creditors. It is different from Chapter 11 bankruptcy where a company takes a break from operations in order to restructure the business. In the case of Safemoon, a trustee has temporal control over its operations and assets. Primarily, the SafeMoon Trustee aims to wind down operations and pay the company creditors.

Safemoon employees are some of the company’s main creditors. As things stand, the company has been operational for around three years since John Karony, Kyle Nagy and Thomas Smith formed it on 1 March 2021. After that, the company launched its token, SFM, in December of the same year.

## SafeMoon Faces Criminal Charges in the United States

SafeMoon filed for bankruptcy a month after the Eastern District of New York Department of Justice (DOJ) and the SEC sued its executives for various crimes that include fraud and misappropriation of funds.

The DOJ sued SafeMoon executives for spending customers’ funds on luxury vehicles and real-estate, among others. It charged them with money laundering conspiracy and conspiracy to commit wire fraud. The two regulatory authorities claim that the SafeMoon team used investor funds to enrich themselves.

Specifically, the DOJ laid charges on Kyle Nagy, Safemoon founder and Thomas Smith, the company’s former Chief Technology Officer for misappropriating customer funds.

The specific allegations are that these executives used more than $200 million to buy houses and luxury cars, among other things. As such, they withdrew investor funds which they claimed to have locked.

To this effect, the [DOJ said](https://www.justice.gov/usao-edny/pr/founders-and-executives-digital-asset-company-charged-multi-million-dollar "DOJ said"), “As SFM’s market capitalization grew to more than $8 billion, the defendants fraudulently diverted and misappropriated millions of dollars’ worth of purportedly “locked” SFM liquidity for their personal benefit. Earlier today, Karony was arrested in Provo, Utah, and Smith was arrested in Bethlehem, New Hampshire.  Nagy remains at large.”

United States Attorney Breon Peace expanded further, saying: “As alleged, the defendants deliberately misled investors and diverted millions of dollars to fuel their greedy scheme and enrich themselves by purchasing a custom Porsche sports car, other luxury vehicles and real estate.”

The Securities and Exchange Commission (SEC) has also sued the SafeMoon executives for violating securities laws. In this case, the SEC charged SafeMoon for selling an unregistered security, SFM. Specifically, it prosecuted Kyle Nagy, Braden John Karony the Chief Executive and Thomas Smith.

David Hirsch, Chief of the SEC Enforcement Division’s Crypto Assets and Cyber Unit (CACU) shed more light on the case. He said, “Decentralized finance claims to deliver transparency and predictable outcomes, but unregistered offerings lack the disclosures and accountability that the law demands, and they attract scammers like Kyle Nagy, who use these vulnerabilities to enrich themselves at the expense of others.”

It is the SEC’s case that SafeMoon promised its investors that the SFM token had unique features which could drive its price very high within a relatively short period. Nonetheless, the price of the token declined instead of rising leading investors to incur much loss.

The SEC also alleges that SafeMoon manipulated the market to prop up the value of its token. The fact is that between 12 March and 20 April 2021 the value of the SFM token increased by over 55,000% to reach a market capitalization of $5.7 billion. Nevertheless, its value later dropped by 50% prompting SafeMoon to manipulate the market. In this case, Karony used misappropriated assets to buy Safemoon (SFM).

Karony also opened a trading account to buy and sell SFM in large quantities to create an impression that the token was in much demand and to stop Safemoon drop in value.

The recent Safemoon developments have caused much anxiety among investors and supporters who feel rug pulled.  A Reddit user by the name [u/anonyamon42069 said](https://www.reddit.com/r/SafeMoon/comments/18ilrtv/at_a_loss_for_words/?rdt=52049 "u/anonyamon42069 said"), “Well it’s officially official: Safemoon is filing for bankruptcy and will cease to exist. It’s game over. I sold whatever POS ‘moon I had left and swapped it to MATIC.”

He/she added, “Never wanna even talk about how bad we all got scammed and especially the money I lost. To the idiots that still think Safemoon has a chance and will “go to the moon: seek help.”

As a result of the Safemoon case Jorge G. Tenreiro, Deputy Chief of the CACU cautioned people who want to invest in cryptocurrencies to take extra care.

[He said](https://www.sec.gov/news/press-release/2023-229 "He said"), “We urge investors to continue to exercise extreme caution in this space, as fraudsters exploit the popularity of crypto assets to promise astronomical profits while all too frequently only delivering a crash landing.”

## Conclusion

On 14 December 2023 SafeMoon filed for Chapter 7 bankruptcy in the United States, showing its intention to permanently close down the business. The filing comes a few days after the United States SEC and DOJ sued its executives for various crimes including money laundering conspiracy, violations of securities laws and conspiracy to commit wire fraud.

## FAQs about SafeMoon

### What is Safemoon?

Safemoon is a meme coin launched on 1 March 2021 which focuses on community and safety. Although the token started off strongly its value has fallen significantly over the years due to several controversies. On 14 December 2023, the <a href="/price/safemoon-sfm" target="_blank" class="blog_inner_link">SafeMoon crypto</a> firm filed for Chapter 7 bankruptcy.

### Does Safemoon have a future?

The future of Safemoon is bleak after the SafeMoon crypto firm filed for Chapter 7 bankruptcy on 14 December 2023. The United States SEC has also sued the firm for offering an unregistered security, SFM. As well, the SEC and the DOJ have sued SafeMoon executives for various crimes including money laundering and violations of the US securities laws.

### Is Safemoon worth anything?

Safemoon (SFM) is currently trading at $0.00003243, meaning that it still has a value. However, its price has been falling since 14 December when SafeMoon crypto firm filed for Chapter 7 bankruptcy.

### How legit is Safemoon?

Since its launch in 2021 [Safemoon (SFM)](https://www.gate.io/article/24652 "Safemoon (SFM)") looked legit as it has been run by a responsible team. However, the SEC and DOJ have sued the SafeMoon executives for committing various crypto crimes.

### Is it safe to buy Safemoon coin?

At the moment [it does not look safe to invest in Safemoon crypto](https://www.gate.io/blog_detail/273/is-safemoon-a-good-investment "it does not look safe to invest in Safemoon crypto") since there is a lawsuit against the firm and its executive for selling the token in the United States without registering it. Worse still, the value of the SFM token has been falling since Safemoon filed for Chapter 7 bankruptcy. Here is a list of the best [exchanges to buy or sell SafeMoon](https://www.gate.io/hot_news/detail/127/a-reliable-exchange-to-trade-safemoon "exchanges to buy or sell SafeMoon").

<div class="blog-details-info">
<div>Author:** Mashell C.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

BTC/USDT -2.42%

ETH/USDT -2.10%

GT/USDT -2.05%

SFM/USDT -14.32%

TL；DR

Introduction

SafeMoon Files for Chapter 7 Bankruptcy

SafeMoon Faces Criminal Charges in the United States

Conclusion

FAQs about SafeMoon

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SafeMoon Initiates Chapter 7 Bankruptcy, SFM Plummets by 42%

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