SafeMoon bankruptcy filing triggers 40% SFM price drop
Kyle Nagy, the DeFi protocol's founder, remains at large.
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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 company’s bankruptcy situation has led to its inability to pay employee wages. The leaked letter stated that employees would “need to file a claim in the bankruptcy case” for their unpaid wages.
The value of the SafeMoon (SFM) token experienced a significant drop from $0.000065 to $0.000045 following news of the bankruptcy. This marks a substantial decrease from its all-time high of $0.0033 on January 5, 2022. As a result, SafeMoon’s market capitalization has fallen from $1 billion to approximately $23.2 million.
The SFM token is currently trading at $0.00004024, down -38.5% over the last 24 hours, according to data from CoinGecko.
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