Is the Former SafeMoon CEO Really Innocent? 2021 Investors Demand Their Money Back

SafeMoon executives charged for defrauding investors. As former CEO John Karony faces trial, will victims of the 2021 collapse find justice? SFM tokens are now worthless.

“I am innocent and did not commit fraud,” declared John Karony, co-founder of SafeMoon, a DeFi project that collapsed in December 2023 amid accusations of rug-pulling investors.

The story of SafeMoon is one of hope and betrayal. After its fanfare launch in March 2021, SafeMoon quickly became a darling of crypto fans, many of whom expected a moonshot, especially as some of the best crypto coins to buy were soaring.

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The Rise and Fall of SafeMoon

At its peak, SafeMoon commanded a market cap of over $1 billion. SFM, the native token, was among the top performers.

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What drew investors was the promise of passive income through its unique tokenomics model.

SafeMoon token holders received rewards from transaction fees, an attractive offer that led thousands of investors, some pouring in their life savings, to seize the opportunity to generate free cash.

Roughly four years after its launch, SafeMoon is a shell of its former self. The native token, SFM, is worth a fraction of a cent, having slid over 97% from its all-time high. At this state, it is grossly underperforming some of the best Solana meme coins. SafeMoon lies in ruins after filing for Chapter 7 bankruptcy in December 2023.

The Trial of Karony

Now, investors, left holding worthless assets, seek justice and demand that authorities hold Karony, the CEO, accountable. The fraud trial is ongoing in the Eastern District of New York.

Federal prosecutors allege that Karony, Kyle Nagy, who remains at large after fleeing to Russia, and former CTO Thomas Smith defrauded investors, siphoning over $200 million from “locked” liquidity pools between 2021 and 2022.

The U.S. Department of Justice (DoJ) and the Securities and Exchange Commission (SEC) charged the three executives with securities fraud, wire fraud, and money laundering conspiracy in November 2023, a month before SafeMoon filed for bankruptcy.

Authorities claim the withdrawn funds were spent on luxury cars, mansions, and a private jet, all while misleading investors about the protocol’s financial health.

“As alleged, SafeMoon’s executives grew their company value to over $8 billion, but instead of rewarding their clients as promised, their insatiable greed led them to spend millions of dollars on their own lavish desires. Today, no luxury vehicles or sprawling real estate can protect them from the consequences of such crimes,” said Ivan J. Arvelo, Special Agent in Charge of Homeland Security Investigations, New York. “HSI New York will relentlessly pursue individuals who seek to exploit investors and the American financial system for their own gain.”

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Will Victims Get Justice?

In the ongoing case, Karony has pleaded not guilty to all charges and was released on a $3 million bond in January 2024.

He maintains his innocence, asserting that the truth will emerge in court. On the first day of his trial on May 6, 2025, reporters noted that the defense team appeared “surprisingly strong.”

Defense lawyers argue that their client was not personally responsible for misappropriating funds. They also contend that changes in U.S. crypto regulations following Donald Trump’s election weaken the SEC’s case. The legal team asserts that SFM was not clearly defined as a security at the time of the alleged misconduct, a position bolstered by recent regulatory shifts.

Meanwhile, federal prosecutors maintain that Karony and his co-founders deliberately deceived investors, and regardless of regulatory nuances, they must face consequences.

Former CTO Thomas Smith pleaded guilty to securities fraud and wire fraud conspiracy in February 2025.

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Smith admitted to misleading investors about the protocol’s financial health and testified against Karony, revealing damning details about their internal operations. He is now standing as a witness against Karony.

For victims, the trial represents their last hope for accountability. After the bankruptcy filing, SafeMoon’s remaining assets are minimal, offering little for investors to recover. Even if funds are retrieved, it remains uncertain whether victims will receive adequate compensation.

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