Decentralized finance protocol SafeMoon has applied for a Chapter 7 bankruptcy. Hours after the filing was made on December 14, 2023, the protocol’s native token, SFM, experienced a sharp decline, plummeting by roughly 40%.

This filing comes after months of scrutiny and controversy surrounding SafeMoon, with critics accusing it of being a “pump and dump” scheme.

A Chapter 7 bankruptcy, also known as a “liquidation bankruptcy,” involves the sale of a debtor’s nonexempt assets to repay creditors. It is a solution for individuals or businesses who are unable to make regular monthly payments towards their debts.

The process begins with filing a petition with the bankruptcy court, resulting in the discharge of debts (although not all debts are discharged). Additionally, the debtor is required to submit schedules detailing their assets, liabilities, current income, expenditures, and a statement of financial affairs.

SafeMoon execs John Karony (CEO) and Thomas Smith (CTO) were arrested on November 1, 2023, with the Department of Justice bringing charges for various fraud-related crimes, including securities fraud conspiracy, wire fraud conspiracy, and money laundering. Kyle Nagy, the protocol’s founder, remains at large.

These charges stem from allegations of misrepresenting material aspects of the SFM offering, using purportedly “locked” assets to pay for personal expenses, and misleading investors.

Hours before the filing, a screenshot of a letter surfaced on Reddit, purportedly written by the firm’s chief restructuring officer. The letter explains how the comp

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Author: Vince Dioquino

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