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Braden John Karony, Kyle Nagy, and Thomas Smith, founders and executives of SafeMoon LLC, have been charged in a multi-million dollar international fraud scheme. The indictment, unsealed in federal court in Brooklyn, accuses the defendants of conspiracy to commit securities fraud, conspiracy to commit wire fraud, and money laundering conspiracy.

The charges stem from their alleged involvement in defrauding investors in a decentralized finance digital asset called "SafeMoon" (SFM), which was issued by their company. According to the indictment, the defendants deceived SFM investors by misrepresenting the accessibility of SFM's 'locked' liquidity, as well as their personal holding and trading of SFM.

As the market capitalization of SFM grew to over $8 billion, the defendants allegedly diverted and misappropriated millions of dollars' worth of purportedly "locked" SFM liquidity for their own benefit. The funds were allegedly used to acquire luxury vehicles and real estate, including a custom Porsche sports car.

Earlier today, Karony was arrested in Provo, Utah, while Smith was arrested in Bethlehem, New Hampshire. Nagy remains at large.

Officials involved in the investigation and charges include Breon Peace, United States Attorney for the Eastern District of New York; James Smith, Assistant Director-in-Charge of the Federal Bureau of Investigation, New York Field Office (FBI); Ivan J. Arvelo, Special Agent-in-Charge of Homeland Security Investigations, New York (HSI); and Thomas M. Fattorusso, Special Agent-in-Charge of Internal Revenue Service Criminal Investigation, New York Field Office (IRS-CI).

United States Attorney Peace emphasized the importance of tackling fraudulent schemes in the digital asset space and holding perpetrators accountable for their actions. He stated, "As fraudsters increasingly use digital assets to mislead investors and misappropriate funds, our Office will be at the forefront of pursuing them and their ill-gotten gains. We will continue our focus in the digital asset space and bring those who defraud investors in this area to justice."

Ivan J. Arvelo, Special Agent in Charge of Homeland Security Investigations, New York, vowed to relentlessly pursue individuals who exploit investors and the American financial system. Arvelo stated, "Today, no luxury vehicles or sprawling real estate can protect [the defendants] from the consequences of such crimes."

IRS-CI Special Agent-in-Charge Fattorusso highlighted the investigation's collaborative effort in tracing the diverted funds and apprehending the involved individuals. He stated, "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."

The indictment alleges that SFM tokens were initially issued in March 2021 on a public blockchain by SafeMoon LLC. The tokens operated under a 10% tax on every SFM transaction, with the proceeds split into two 5% tranches to benefit SFM holders and liquidity pools. However, the defendants allegedly misled investors about these aspects, retaining access to the liquidity pools and diverting millions of dollars' worth of tokens for personal gain.

The defendants also allegedly engaged in buying and selling SFM for their benefit, despite publicly denying their involvement. They utilized complex transaction routing and pseudonymous exchange accounts to mask the movement of fraudulent proceeds.

The charges in the indictment are allegations, and the defendants are presumed innocent unless proven guilty.

The case is being handled by the Office's Business and Securities Fraud Section, with Assistant United States Attorneys Drew G. Rolle, Matthew R. Galeotti, and John O. Enright leading the prosecution, assisted by Paralegal Specialist Jacob Menz.

This case highlights the ongoing efforts to combat fraudulent activities in the digital asset space, demonstrating the commitment of authorities to protect investors and bring those who engage in fraudulent schemes to justice.