Platform: SafeMoon (SafeMoon LLC)CEO: Braden John Karony
Investigation Status: Concluded — Convicted and Sentenced
Investor Losses: $9+ Million (Karony personally); $40+ Million (total scheme)
Sentence: 100 Months Federal Prison
On February 10, 2026, the former SafeMoon CEO, Braden John Karony, was sentenced for 100 months in federal prison for his involvement in the scheme to defraud investors out of millions of dollars by falsely representing the security of SafeMoon’s liquidity pools. This is one of the most significant DeFi fraud convictions to date, providing an in-depth look into the operation of rug-pull scams, despite the founder’s claims that they’re not possible.
What SafeMoon Promised
SafeMoon tokens were digital assets first issued in March 2021 on a public blockchain. As a result of the smart contract, SafeMoon’s tokens were subject to an automatic 10% tax with every transaction. This 10% was divided equally into two 5% parts, with the purpose being to benefit SafeMoon’s holders in two ways: one part in proportion to the holders and the other part going into SafeMoon’s liquidity pools.
Critically, Karony and his co-conspirators assured their investors that SafeMoon had “locked” liquidity pools, which would increase in size over time through the transaction tax, and that these locked liquidity pools would prevent any rug pull by executives who might pull liquidity. They assured their investors that the liquidity pool tokens would only be used for approved business purposes, not personal gain, and that they didn’t personally hold or trade SafeMoon tokens.
What Actually Happened
As set out in the DOJ and SEC enforcement actions, each of these representations was false. Karony and his co-conspirators had access to SafeMoon’s liquidity pools, which they used to divert millions of dollars’ worth of SafeMoon tokens for their personal benefit. While they publicly denied holding or trading SafeMoon, they repeatedly bought and sold SafeMoon tokens, often at the market’s peak, earning themselves millions of dollars in profits.
They masked their movement of the fraudulent proceeds via numerous private un-hosted crypto wallet addresses, complex transaction chains, and pseudonymous centralized exchange accounts. Karony personally earned more than $9 million in crypto from the scam, which he used to purchase a $2.2 million home in Utah, as well as other properties in Utah and Kansas, two Audi R8s worth about $277,000 each, a Tesla, and customized Ford F-550 and Jeep Gladiator pickups.
The Scale of the Fraud
After SafeMoon was launched in March 2021, it quickly grew to millions of holders with a market capitalization of over $8 billion. The extent of SafeMoon’s retail participation made it one of the most widely held DeFi tokens during the bull run of 2021. The SafeMoon scam involved thousands of victims, including military veterans and ordinary Americans, according to Joseph Nocella, U.S. Attorney.
In court, prosecutors presented evidence showing that Karony, SafeMoon’s Chief Technology Officer, Smith, and founder Kyle Nagy stole over $40 million from SafeMoon’s liquidity pool. Smith has pleaded guilty to the crime and awaits sentencing, while Nagy left the country and remains at large with an active warrant out for his arrest.
The Conviction and Sentence
After deliberating for roughly two hours, the federal jury convicted Karony on all counts: conspiracy to commit securities fraud, wire fraud, and money laundering. U.S. District Judge Eric Komitee described the SafeMoon scam as a “massive fraud.” He further stated that this scam resembled theft more than fraud, especially since the amounts were not small per individual, which is often the case in securities fraud.
In addition to the 100 months of imprisonment, Karony will have to forfeit $7.5 million and his interest in two residential properties. The total amount of restitution that will have to be made to the victims will be determined later.
Verification Status: CONVICTED — COMPANY DEFUNCT
SafeMoon LLC filed for bankruptcy in December 2023. The SafeMoon token, abbreviated as “SFM,” is still present in circulation, though it has dropped by about 99% from its peak in 2021. There is no leadership, development, or legitimate entity operating SafeMoon. Any entity claiming to operate SafeMoon or offering recovery services for SafeMoon-related losses is likely to be a second scam.
Fintvia Assessment: The SafeMoon conviction represents one of the most clear-cut DeFi fraud cases to reach federal trial. The case demonstrated not only violations of regulatory frameworks, but also systematic theft from investors who were told that such an event was not possible. The sentence, which comes in at 100 months, or about 8.33 years, is significantly lower than the possible sentence of 45 years, given the defendant’s age and lack of prior criminal convictions. However, it remains one of the longest sentences handed down in a DeFi-related fraud case to date.
For investors, the lesson to learn from SafeMoon is that while public assurances of locked liquidity are important, they are only relevant if they are actually backed by proper technical and legal controls. If founders maintain administrative access to these funds, they are irrelevant.
