US Prosecutors to Pursue Case Against Ex-SafeMoon CEO Despite DOJ Memo

Despite a Department of Justice (DOJ) memo suggesting a reevaluation of certain crypto-related charges, U.S. prosecutors are proceeding with their case against former SafeMoon CEO Braden John Karony. Karony faces serious allegations, including securities fraud, wire fraud, and money laundering, stemming from his involvement with the cryptocurrency project SafeMoon between 2021 and 2022.

Background and Legal Proceedings

In November 2023, Karony, along with SafeMoon's Chief Technology Officer Thomas Smith and creator Kyle Nagy, was indicted on multiple federal charges. The Securities and Exchange Commission (SEC) and DOJ accused the trio of misleading investors by falsely claiming that SafeMoon's liquidity pool was "locked," when, in reality, they had access to it and allegedly misappropriated over $200 million for personal expenses.

Thomas Smith has since pleaded guilty to wire fraud and securities fraud conspiracy charges, admitting to his role in the scheme citeturn0search1. Karony, however, maintains his innocence and has sought to delay his trial, citing potential changes in SEC policies under the Trump administration that might affect the classification of digital assets like SafeMoon.

DOJ Memo and Prosecutorial Strategy

A recent DOJ memo has led to discussions about the potential reclassification of certain crypto assets, which could impact the legal status of tokens like SafeMoon. Despite this, prosecutors argue that the charges against Karony, particularly those related to wire fraud and money laundering, are not contingent on SafeMoon's classification as a security. They emphasize that the core of the case involves alleged fraudulent activities and misappropriation of funds, which remain prosecutable regardless of any policy shifts.

Bail and Flight Risk Concerns

Initially granted bail in Utah, Karony's release was contested by federal prosecutors, who cited his substantial financial resources and international ties as factors that posed a flight risk. They highlighted his ability to access digital assets globally and his history of international travel, including extended stays in Europe and the United Kingdom. As a result, his bail was temporarily revoked, and discussions about his detention continue.

Broader Implications

The SafeMoon case underscores the increasing scrutiny of the cryptocurrency industry by U.S. regulators. It highlights the challenges in classifying digital assets and the legal complexities involved in prosecuting crypto-related fraud. As the case progresses, it may set precedents for how similar cases are handled in the future, especially concerning the application of securities laws to digital tokens.