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- 1 larger portions of the SafeMoon’s liquidity pool were never locked: SEC.
- 2 The executives of SafeMoon withdrew over $200 Million for their wellbeing.
- 3 Some employees of the ecosystem were practising wash trading to lure investors.
U.S regulator Securities and Exchange Commission (SEC) charged the creator of Safemoon LLC Kyle Nagy, Chief Executive Officer John Karony and Chief Technology Officer Thomas Smith for perpetrating a massive fraudulent scheme through the unregistered sale of the crypto asset security.
The SEC’s complaint details that the defendants promised to take the price of the token to the moon as its name suggested but instead of generating profits for its investors, they allegedly wiped out Billions in market capitalization and also withdrew over $200 Million from the project in the form of crypto assets and used investors funds for their personal well-being.
The Chief of the SEC Enforcement Division Crypto Assets and Cyber Unit David Hirsch said that “The DeFi promised its investors to deliver transparency and predictable outcomes,however unregistered offering lack the disclosure and accountability that the law demands and they attract scammers like Kyle Nagy, who used these loopholes to enrich themselves on the expenses of investors”.
SEC highlighted that during the early phase of Safemoon token’s marketing, Klye promised the investors that the funds are safely locked and could not be able to be withdrawn by anyone including the defendants.
As per allegations, larger portions of the liquidity pool were never locked and the responsible authorities of the SafeMoon ecosystem used those funds to purchase McClaren cars, international vacations among other luxury items.
The SEC’s complaint also alleges that SafeMoon skyrocketed in price by more than 55k percent from March 12 to April 20 2021, and following the surge. Market cap reached $5.7 Billion before its price declined over 50% and the investors came to know that the majority of liquidity pools were never locked.
It is important to note that SEC complaint alleges that Karony used a trading account that was made on a trading platform to buy and sell SafeMoon token to create the impression of market activities, this type of practice is majorly termed ‘ Wash Trading’.
Were Hacker’s Aware About SafeMoon’s Unlocked Liquidity Pool?
It is believed that the hack that affected the SafeMoon was scripted. As per dozens of analysts, hackers were aware about the mishandling of users in the ecosystem which gave them a chance to swipe the funds.
The attacker took advantage of the situation and sold off the tokens at an inflated price. A few hours after the exploit, the attackers sent an on-chain message to the exchange saying they are willing to return the stolen funds.
Disclaimer
The views and opinions stated by the author or any people named in this article are for informational ideas only and do not establish financial, investment, or other advice. Investing in or trading crypto or stock comes with a risk of financial loss.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
