SafeMoon officially filed for Chapter 7 bankruptcy. The cryptocurrency’s price has plummeted by 18%, reaching new lows as the company officially files for Chapter 7 bankruptcy. This development follows a series of setbacks, including the arrest of SafeMoon’s CEO and CTO by the US Department of Justice (DOJ) for defrauding customers.
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SafeMoon entered the crypto market with goals and a unique approach, relying on influencer-driven marketing strategies and celebrity endorsements to fuel its growth.
The strategy initially worked, with the token’s market capitalization soaring to over $17 billion at its peak in 2021.
However, the tide quickly turned, and within 12 months, SafeMoon faced a decline amid allegations of fraud and numerous lawsuits.
The downfall of SafeMoon accelerated when the US Securities and Exchange Commission (SEC) charged the company and its executives CEO John Karony, CTO Thomas Smith, and creator Kyle Nagy with fraud and the unregistered offering of crypto securities.
The SEC accused the executives of misleading investors, diverting funds, and engaging in a massive fraudulent scheme. The legal troubles deepened when Karony and Smith were arrested, while Nagy remained at large.
The arrest of SafeMoon’s top executives in November resulted in the largest single day decline for the cryptocurrency.
The recent filing for Chapter 7 bankruptcy has sell-off, with the price crashing by 18% in the past week alone. The market sentiment with many attributing SafeMoon’s demise to operating on stolen funds.
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SafeMoon’s bankruptcy filing, officially submitted to the United States Bankruptcy Court for the District of Utah.
The company, operating under the name SafeMoon US LLC, estimates assets in the range of $10 million to $50 million and liabilities ranging from $100,001 to $500,000.
Chapter 7 bankruptcy, also known as liquidation bankruptcy, implies that the company’s assets will be liquidated to repay creditors, an end to restructuring and relaunching.
As news of SafeMoon’s bankruptcy spread, the cryptocurrency community, particularly on platforms like Reddit, expressed a mix of regret, frustration, and anger.
Former SafeMoon supporters voiced their feelings of being rug-pulled and scammed by the developers, with some attributing the downfall to a accountability.
The downfall of SafeMoon is not a financial setback but also a blow to the credibility of its leadership. CEO John Karony, once the face of the project, is now facing legal charges, including fraud and money laundering.
The community’s resentment towards Karony has grown, especially as allegations surfaced that he cashed out his own holdings before the token’s collapse.
The legal challenges faced by SafeMoon are incidents but part of a trend where regulatory authorities are cracking down on fraudulent activities within the cryptocurrency space.
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The SEC’s actions against SafeMoon highlight the importance of adherence to securities laws and the consequences for those found in violation.
On December 14, SafeMoon officially submitted a voluntary petition for Chapter 7 bankruptcy to the United States Bankruptcy Court for the District of Utah.
The filing revealed estimated assets in the range of $10 million to $50 million, with estimated liabilities between $100,001 and $500,000.
This move, also known as liquidation bankruptcy, indicates that SafeMoon has no intention of restructuring and relaunching the company.
A leaked internal message from SafeMoon’s Chief Restructuring Officer, Kenneth Ehrler, explained that the company faced insurmountable operational and financial challenges, leading to the decision to file for bankruptcy.
The message further revealed that employees would need to file claims in the bankruptcy court for their unpaid wages. The cryptocurrency market reacted to the news of SafeMoon’s bankruptcy filing.
The token, SFM, experienced a 31% drop within five hours of the announcement, reaching a new all-time low of $0.00003270. This downturn is the second single day decline for SafeMoon, following the initial arrest of its executives.
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