An aspiring Utah businessman was arrested Wednesday after authorities said he was involved in a scheme to use investor money to buy luxury vehicles and real estate.
Braden John Karony, the 27-year-old CEO of cryptocurrency company SafeMoon, is charged with conspiracy to commit securities fraud, conspiracy to commit wire fraud and conspiracy to commit money laundering. He was taken into custody in Provo, according to the U.S. Attorney’s Office in Eastern New York.
SafeMoon founder Kyle Nagy, 35, and Chief Technology Officer Thomas Smith, 35, were also arrested and charged with the same three crimes. According to the U.S. Attorney’s Office, Smith was arrested in Bethlehem, New Hampshire; As of Thursday afternoon, Nagy remained at large.
“Mr. Karony looks forward to returning to New York and vigorously defending his allegations. He maintains his innocence,” said Karony’s attorney Clayton Sims.
According to court documents, Karony was born in Virginia and served in the U.S. Army for six years. He attended both Utah Valley University and LDS Business College, now known as Ensign College. An indictment filed in U.S. District Court in Eastern New York alleges he used funds from the fraudulent scheme to purchase an 8,000-square-foot home in Pleasant Grove. According to Zillow, the home is worth more than $1.5 million.
According to the Utah Department of Commerce, SafeMoon is currently registered in Pleasant Grove and was founded in March 2021 with the minting of 1 quadrillion tokens. The executives allegedly grew SafeMoon to a market capitalization of more than $9 billion, the indictment says.
The company was touted by media personality Dave Portnoy, founder of Barstool Sports, who told fans he had invested more than $40,000 in SafeMoon. Portnoy later “told people it might be a scam,” he wrote on X, the platform formerly known as Twitter.
Karony was also named one of Utah’s 2022 CEOs of the Year by Utah Business, a sister company of Deseret News.
According to court documents, Karony and his colleagues allegedly lied to investors, telling them that their money was “locked” in a liquidity pool that would increase in size due to a 10% tax on each SafeMoon transaction.
This locked pool prevented SafeMoon executives from withdrawing liquidity, Karony and his colleagues allegedly told investors, the indictment says. SafeMoon executives claimed “that the tokens in the liquidity pool would not be used to enrich the SafeMoon developers,” according to court documents. They also promised investors “that the developers did not hold SafeMoon and act for their benefit,” the indictment says.
The indictment states that “hundreds of thousands” of investors held SafeMoon and that the company recorded its highest daily trading volume of $43.96 million in April 2021.
However, according to the indictment, Karony and the other defendants had access to the “locked” pools and intentionally diverted and misused millions of dollars worth of tokens from the SafeMoon liquidity pools for their personal benefit.
“In addition, although Karony, Nagy and Smith publicly denied personally owning or trading SafeMoon, they repeatedly bought and sold SafeMoon for their personal benefit, including at the level of SafeMoon’s market price, resulting in millions of dollars in profits,” it said prosecutors allege in the indictment.
Karony and his colleagues carried out the plan from March 2021 to April 2023, according to the indictment.
According to prosecutors, those proceeds were allegedly used to purchase properties in New Hampshire, Florida and Utah, including the Pleasant Grove home. Smith purchased a customized Porsche 911 after withdrawing $860,000 traceable to the SafeMoon liquidity pool, the indictment says.
“While this fraud scheme may be complex, the end result is simple: theft. Investors were assured that their money was safe, while the defendants allegedly misled investors and diverted millions of dollars to line their pockets and driveways,” said Thomas Fattorusso, special agent in charge of the New York Bureau of Criminal Investigation Internal Revenue Service, in a statement.
“Their insatiable greed led them to spend millions of dollars on their own lavish desires. Today, neither luxury vehicles nor expansive real estate can protect them from the consequences of such crimes,” said Ivan Arvelo, Special Agent in Charge of Homeland Security Investigations in New York.
The U.S. Securities and Exchange Commission also filed a civil lawsuit against Karony, Smith and Nagy in U.S. District Court in Eastern New York. The complaint accuses them of six counts of fraud related to the U.S. Attorney’s Office’s proposed scheme and unregistered sale of SafeMoon tokens.
On Thursday, Karony’s lawyer filed a motion for pretrial release.
Karony “is not a flight risk, let alone a ‘serious’ risk within the meaning of the Bail Reform Act, nor does he pose a danger to the community.” Accordingly, the Bail Reform Act directs the court to release Mr. Karony at his personal discretion,” it said it in the court documents.
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