SafeMoon, a project whose goal was to “safely” moon a token – mostly by preventing holders from cashing out with large fees – plummeted once investors found out that the investment pools were not actually locked as promised within the same month that the project reached a market cap of $5.7 billion.

Founders’ Trial Underway

According to court documents, prosecutors believe that SFM tokens were actually used to fund a life of luxury for those at the helm of the project.

“As alleged, the defendants deliberately misled investors and diverted millions of dollars to fuel their greedy scheme and enrich themselves by purchasing a custom Porsche sports car, other luxury vehicles, and real estate.”

This opinion is strengthened by the smart contract exploit worth nearly $9 million suffered by the project earlier this year, which many believe was an inside job.

According to prosecutors, founders Kyle Nagy, Thomas Smith, and Braden John Karony have committed securities fraud. Karony – the CEO of the project – faces a statutory maximum of 45 years in jail if found guilty.

Bail Order to Be Reviewed By Judge

Earlier this month, Karony and Smith were arrested, while Nagy remains free for undisclosed reasons. Smith has since managed to secure bail in exchange for a $500k bond and is reportedly pursuing a plea deal.

Karony also attempted to secure a temporary release – however, the prosecution blocked his bid a day later.

On the 8^th of November, Karony was also granted bail for the same amount as his co-executive. If granted, Karony would be allowed to live in his Miami apartment with no access to crypto exchanges and wallets. He would also have been barred from promoting any of his businesses in any form.

However, New York District Judge LaShann DeArcy Hall has stayed Judge Oberg’s decision to approve bail following a hearing in Utah.

According to the prosecution, Karony presents a significant flight risk, having major connections in Europe – including his fiancée.

Furthermore, the court allegedly failed to accurately assess the defendant’s assets. The prosecution believes that Karony still has access to millions of dollars – compared to which 500k is a drop in the bucket.

“If convicted, the defendant faces a statutory maximum of 45 years’ imprisonment. These facts all provide powerful incentives for the defendant to leverage his substantial (and opaque) financial assets and foreign ties to avoid that outcome.”

Karony’s bail conditions will be reviewed at a later date – and may be revoked entirely.