BNB

SafeMoon Files For  Chapter 7 Bankruptcy Amidst SEC Heat

by BSC News

December 15, 2023

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The voluntary liquidation comes amid a crackdown by the United States Securities and Exchange Commission (SEC), which accused three executives of inflating SafeMoon's market capitalization.

SafeMoon (SFM), once a thriving memecoin, has voluntarily filed for Chapter 7 bankruptcy in the United States. The primary goal of Chapter 7 bankruptcy is to liquidate a debtor's assets to repay creditors without focusing on restructuring and relaunching the business.  

This strategic decision to liquidate holdings comes on the heels of a recent crackdown by the United States Securities and Exchange Commission (SEC). The SEC accuses three SafeMoon executives—founder Kyle Nagy, CEO John Karony, and CTO Thomas Smith—of engaging in deceptive practices to artificially inflate SafeMoon's market capitalization to a staggering $5.7 billion.

SEC Allegations and Executive Arrests

The SEC complaint details allegations of wash trading, deceptive marketing tactics, and misleading statements regarding liquidity lock-up timelines. Last month, arrests were made, with Karony and Smith taken into custody, while Nagy remains at large. 

The SEC claims that the executive team diverted $200 million from SafeMoon for personal use, including the acquisition of sports cars and real estate.

A purported letter from SafeMoon's chief restructuring officer circulating on Reddit reveals the company's financial distress, citing an inability to pay wages before the bankruptcy filing. Employees are advised to file claims in bankruptcy court for unpaid wages. 

Bankruptcy Proceedings and Company Details

With its bankruptcy case filed in the U.S. Bankruptcy Court for the District of Utah, SafeMoon is seeking to keep its exempt properties and discharge as many of its debts as possible. 

According to court documents, SafeMoon reports between 50 and 99 creditors, assets ranging from $10 million to $50 million, and debts between $100,000 and $500,000. The filing aligns SafeMoon with other major crypto firms that have sought bankruptcy in the past year.

SafeMoon's affiliated token experienced a sharp 30% decline within five hours of the bankruptcy filing.

Disclaimer

Disclaimer: The views expressed in this article do not necessarily represent the views of BSCNews. The information provided in this article is for educational and informational purposes only and should not be construed as investment advice. BSCNews assumes no responsibility for any investment decisions made based on the information provided in this article

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