SafeMoon CTO Pleads Guilty to Fraud in $200M Crypto Scheme

Highlights:

• The former CTO of SafeMoon has pleaded guilty to fraud and could face up to 25 years in prison.
• SafeMoon executives allegedly misused over $200 million and inflated the market value of the token.
• The court has set April 7 as the date for opening statements in the case.

Thomas Smith, the former chief technology officer of SafeMoon, has pleaded guilty to a conspiracy of securities fraud and wire fraud. A recent court filing in Brooklyn federal court confirmed his admission. Prosecutors accused him of misleading investors about the status of SafeMoon’s liquidity pool by falsely claiming the funds were locked and inaccessible. However, authorities say he and other executives had full access and misused the funds.

🚨 BREAKING: SafeMoon's CTO, Thomas Smith, pleads guilty in a $200 million crypto fraud case. The scheme involved misleading investors about the token's liquidity. #Crypto #SafeMoon pic.twitter.com/Vtmgu97rtP

— Crypto Jessica (@CryptoJessXBT) February 21, 2025

In a court appearance before Magistrate Judge Cheryl Pollak, Smith withdrew his initial not-guilty plea and formally pleaded guilty to both charges. Judge Pollak recommended that U.S. District Judge Eric Komitee, who is overseeing the case, accept the plea.

If the court accepts, Smith faces severe penalties. The Criminal Code imposes a potential 20-year prison term for wire fraud conspiracy along with a 25-year maximum sentence for securities fraud conspiracy. Judge Komitee holds final power to decide the punishment based on his involvement in the fraud.

SafeMoon’s CEO, Braden John Karony, and creator, Kyle Nagy, were also charged in the case. Karony has pleaded not guilty and sought to dismiss the charges, but the request was denied. Security agencies continue their hunt for Nagy, who is believed to be hiding in Russia.

Allegations of Misuse of Investor Funds and Market Manipulation

Prosecutors claim SafeMoon executives transferred more than $200 million to their accounts. The executives allegedly spent the funds raised by investors on expensive real estate and luxury cars. Prosecutors revealed that the executives presented SafeMoon’s SFM token as a safe investment by promising its liquidity would remain protected. The investigators determined the executives maintained complete system access and used the funds to benefit themselves.

The executives also carried out wash trading activities. The executives maintained a market trend by buying and selling the same asset many times. They used the method to artificially increase the market value of SafeMoon which rose to $8 billion at its peak.

Once investors learned the truth, the token’s value plummeted and caused huge losses to investors. The U.S. Securities and Exchange Commission states that false claims led to major financial damage. Investors relied on misleading statements and lost money as a result.

Legal Developments and SafeMoon’s Future Moves

The guilty plea comes after he unsuccessfully tried to have the charges dropped. The court refused to grant him either a trial delay or dismissal. The court has set April 7 as the date for opening statements.

Meanwhile, SafeMoon is preparing to launch a new memecoin on the Solana blockchain. The recent company move follows a major burn of its SFM token supply. The decreased token supply following the burn could lead to changes in market value. SafeMoon aims to attract new interest and increase liquidity through this strategy.

SafeMoon goes full community-driven with a Solana meme coin launch! 🌐

SFM holders can swap tokens soon, but beware of scams—the official contract isn't live yet! pic.twitter.com/TcUXLOldhD

— Backdoor News (@Backdoor_News) February 15, 2025

The decision to shift to Solana represents a change in SafeMoon’s approach. The blockchain is known for its fast transactions and lower fees. Many cryptocurrency projects are moving to Solana for these benefits.