SafeMoon’s Financial Crisis Deepens with Chapter 7 Bankruptcy Filing
The decentralized finance (DeFi) project SafeMoon has officially filed for Chapter 7 bankruptcy, also known as “liquidation bankruptcy,” with the United States Bankruptcy Court in the District of Utah. The development follows a period of turmoil within the company that has spanned several months.
The voluntary petition was filed by Attorney Mark Rose and was signed by Chief Restructuring Officer Kenneth Ehrler.
Safemoon Bankruptcy
According to the filing on December 14th, SafeMoon US LLC, the company in question, has projected assets ranging from $10 million to $50 million and estimated liabilities between $100,001 and $500,000.
Despite the absence of an official announcement from the project, the current developments seem inevitable, given the extended period of turbulence the company has been undergoing.
A letter addressed to employees, allegedly penned by the firm’s chief restructuring officer, emerged on Reddit, clarifying that the reason behind the inability to fulfill employee wage payments before the official filing was attributed to the firm’s bankruptcy proceedings.
The letter advised employees to submit claims for their unpaid wages in the bankruptcy court.
Much like several projects in 2021, SafeMoon received endorsements from celebrities and influencers such as Jake Paul and Soulja Boy. However, a lawsuit filed in February 2022 claimed that musicians like Nick Carter, Soulja Boy, Lil Yachty, and YouTubers Jake Paul and Ben Phillips were accused of mimicking actual Ponzi schemes.
They were alleged to have misled investors into acquiring the project’s native SAFEMOON tokens by falsely promising unrealistic profits.
In response to these developments, numerous experts shared their perspectives on the controversial protocol, advising caution to potential investors.
Internal Chaos
This bankruptcy adds to the recent challenges faced by the company, occurring just a month after the US Securities and Exchange Commission (SEC) accused SafeMoon, along with its founder Kyle Nagy, CEO John Karony, and CTO Thomas Smith, of violating securities laws. The regulator characterized the situation as a “massive fraudulent scheme.”
If proven guilty, Karony could potentially face a maximum prison sentence of 45 years, according to prosecutors.
Karony and Smith were taken into custody, while Nagy remains at large for undisclosed reasons. Smith, who managed to secure bail through a $500,000 bond, was reportedly pursuing a plea deal. On the other hand, Karony’s attempt to obtain temporary release was blocked by the prosecution a day later.
Last month, Karony was granted bail with the same $500,000 amount as his co-executive. If released, he would have resided in his Miami apartment without access to crypto exchanges and wallets. Additionally, he would have been prohibited from promoting any of his businesses.
However, New York District Judge LaShann DeArcy Hall intervened by putting a hold on Judge Oberg’s decision to approve bail after a hearing in Utah.
The prosecution had then argued that Karony posed a significant risk of fleeing, citing his substantial connections in Europe, including his fiancée. Moreover, they claim that the court inaccurately assessed the defendant’s assets, contending that Karony still has access to millions of dollars, making the proposed $500,000 bail insufficient.
The post SafeMoon’s Financial Crisis Deepens with Chapter 7 Bankruptcy Filing appeared first on CryptoPotato.
