Introduction
Braden Karony, the former CEO of the cryptocurrency SafeMoon, has been sentenced to 100 months in federal prison for orchestrating a massive fraud scheme that defrauded thousands of investors. Ordered to forfeit $7.5 million, Karony’s conviction on conspiracy to commit securities fraud, wire fraud, and money laundering marks a stark warning from U.S. authorities about the consequences of financial crimes in the digital asset space.
Key Points
- Karony diverted funds from supposedly locked liquidity pools, using investor money to purchase luxury real estate and vehicles worth millions.
- The SafeMoon token used a controversial 10% transaction tax mechanism, with half supposedly going to holders and half to liquidity pools.
- This case represents coordinated enforcement between criminal prosecutors and the SEC, highlighting increased regulatory scrutiny of crypto projects.
The Scheme: From $8 Billion Market Cap to Fraud
The SafeMoon (SFM) token, which soared to an $8 billion market capitalization in 2021, was built on a controversial 10% transaction tax. The project’s mechanics promised that half of this tax would be automatically redistributed to token holders, while the other half would be deposited into liquidity pools to stabilize and strengthen trading of the asset. This structure attracted a wide range of investors, including military veterans and hard-working Americans, who believed their investments were fueling a sustainable ecosystem.
Instead, prosecutors proved that Braden Karony systematically diverted and misappropriated the funds designated for these liquidity pools. He maintained access to what investors were told were “locked” tokens, using the capital not to support the project but to fund an extravagant personal lifestyle. According to the United States Attorney’s Office, Karony “lied to investors from all walks of life” and “defrauded thousands of victims in order to buy mansions, sports cars, and custom trucks.”
The Sentence and the Stolen Millions
On Tuesday, District Judge Eric Komitee of the Eastern District of New York sentenced Karony to 100 months, or 8 years and 4 months, in prison. While this fell short of the government’s requested 12-year sentence, it represents a significant penalty for crimes that carried a maximum sentence of up to 45 years. In addition to the prison term, Karony was ordered to forfeit $7.5 million, with victim restitution amounts still to be determined by the court.
The scale of the misappropriation was substantial. IRS-CI New York Special Agent in Charge Harry Chavis stated that Karony “acquired over $9 million in crypto assets” by “employing complex transactions to obscure the movement of these illicit proceeds.” His defense, which cited his “still-developing brain,” his parents’ service to the country, and his personal kindness, failed to sway the court from imposing a serious sentence. United States Attorney Joseph Nocella emphasized that “Today’s sentence demonstrates that there are significant consequences for financial crimes.”
Broader Fallout and Regulatory Scrutiny
The case against Karony was part of a coordinated enforcement action. He and co-conspirator Thomas Smith were originally charged in 2023 and also faced a civil suit from the Securities and Exchange Commission (SEC). Smith has pleaded guilty to conspiracy to commit securities fraud and wire fraud and is currently awaiting sentencing. A third alleged co-conspirator, Kyle Nagy, remains at large, according to authorities.
This prosecution underscores the heightened regulatory and criminal scrutiny facing the cryptocurrency industry. The involvement of both the Department of Justice and the SEC highlights a multi-agency approach to policing fraud and market manipulation in digital assets. The SafeMoon case serves as a potent example for other projects, illustrating that promises of locked funds and complex tokenomics will not shield executives from prosecution when investor capital is misused for personal gain.
📎 Related coverage from: decrypt.co
