DeFi protocol SafeMoon has filed for Chapter 7 bankruptcy protection, a significant development following allegations of fraud by the U.S. Securities and Exchange Commission last month. The bankruptcy filing was submitted to the United States Bankruptcy Court in the District of Utah on Thursday.
The bankruptcy protection document, signed by chief restructuring officer Kenneth Ehrler, reveals that SafeMoon US LLC possesses estimated assets ranging between $10 million to $50 million. However, the firm also faces substantial liabilities, estimated to be between $100,001 to $500,000.
This financial distress follows closely on the heels of the SEC’s charges against SafeMoon and its executive team. The SEC’s allegations include fraud and the unregistered offering of crypto securities. According to the SEC, SafeMoon’s executives, Kyle Nagy, John Karony, and Thomas Smith, engaged in deceptive practices, failing to deliver on their promises of profits and misusing investor funds for personal gain.
The situation escalated last month with the arrest of Karony and Smith, while Nagy remains at large. Prosecutors have accused the defendants of misleading investors about the accessibility of SafeMoon’s ‘locked’ liquidity and their personal trading activities. As SafeMoon’s market capitalization soared to over $8 billion, the executives allegedly diverted millions of dollars for their personal use, a serious breach of trust and legal compliance.
The repercussions of the bankruptcy protection filing have been swift and severe for SafeMoon’s market position. As of the time of writing, the SafeMoon token, SFM, has experienced a significant drop, falling 44% in the past 24 hours, according to CoinGecko data.
This filing comes amid a broader crackdown by the SEC on the crypto industry, notably targeting major players like the world’s largest crypto exchange, Binance. The SEC’s recent pressure reflects an increasing effort to regulate and oversee the rapidly evolving cryptocurrency market.
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