The SafeMoon lawsuit landscape covers a federal criminal prosecution, a Securities and Exchange Commission civil enforcement action, a Chapter 7 bankruptcy with a $100 million adversary complaint, and a proposed investor class action settlement. SafeMoon’s three top figures — founder Kyle Nagy, CEO Braden John Karony, and chief technology officer Thomas Smith — were charged in November 2023 with defrauding investors of hundreds of millions of dollars. Karony was convicted at trial and, in February 2026, sentenced to 100 months in federal prison. Smith pleaded guilty. Nagy is a fugitive believed to be living in Russia.1DOJ. CEO of Digital Asset Company SafeMoon Sentenced to 100 Months
What Investors Were Told and What Actually Happened
SafeMoon launched on March 8, 2021, as a decentralized finance token on the Binance Smart Chain. Every transaction carried a 10 percent tax. Half was supposed to be redistributed to existing holders as “reflections.” The other half was supposed to flow into liquidity pools that Nagy publicly assured investors were “safely locked,” meaning no insider could drain them.2SEC. SEC Charges SafeMoon and Top Executives With Fraud
They were not locked. Prosecutors and the SEC allege Nagy, Karony, and Smith retained access to the pools the whole time and, between March 2021 and May 2022, withdrew and diverted tokens for personal use, routing proceeds through private wallets and pseudonymous exchange accounts.3DOJ. Founders and Executives of Digital Asset Company Charged The token’s price rose more than 55,000 percent between launch and April 20, 2021, when SafeMoon peaked at a market capitalization above $5.7 billion. When the market learned the pool was not locked, the price fell nearly 50 percent in a single day.2SEC. SEC Charges SafeMoon and Top Executives With Fraud
The Federal Criminal Case
On November 1, 2023, the U.S. Attorney’s Office for the Eastern District of New York unsealed an indictment charging all three men with conspiracy to commit securities fraud, conspiracy to commit wire fraud, and money laundering conspiracy.3DOJ. Founders and Executives of Digital Asset Company Charged
Braden John Karony
Karony went to trial before Judge Eric Komitee and was convicted on all three counts in May 2025 after a 12-day trial. Prosecutors showed the jury that Karony had funneled more than $9 million in crypto assets into personal spending, including a $2.2 million Utah home, additional properties in Utah and Kansas, and vehicles including two Audi R8s, a Tesla, a custom Ford F-550, and a Jeep Gladiator. The jury returned a forfeiture verdict of roughly $2 million.4DOJ. Chief Executive Officer of Digital Asset Company Found Guilty
On February 10, 2026, Judge Komitee sentenced Karony to 100 months in federal prison and ordered him to forfeit approximately $7.5 million and two residential properties. Restitution has not yet been set.1DOJ. CEO of Digital Asset Company SafeMoon Sentenced to 100 Months Karony filed a notice of appeal on February 24, 2026.5MLex. SafeMoon CEO Files Appeal After US Fraud Conviction
Thomas Smith
Smith, known online as “Papa,” was arrested the day the indictment was unsealed. On February 20, 2025, he pleaded guilty in the Eastern District of New York to conspiracy to commit securities fraud and conspiracy to commit wire fraud. Prosecutors alleged he had used proceeds traceable to SafeMoon’s liquidity pool to buy a custom Porsche 911 and a non-fungible token. His sentencing has not been scheduled.6Union Leader. NH Man Pleads Guilty in SafeMoon Crypto Fraud
Kyle Nagy
Nagy fled the country before the November 2023 indictment was unsealed and is believed to be in Moscow. Radio Free Europe/Radio Liberty reported he relocated to Russia in April 2024 with the help of a Russian businessman and published an image showing him walking in central Moscow in the summer of 2024. Leaked database records from July 2025 indicated Nagy and his wife had visited a Moscow medical laboratory.7RFE/RL. Russia Crypto Fraud: Kyle Nagy in Moscow The Russian Telegram outlet VChK-OGPU reported that two Russian citizens identified as alleged FSB agents had extorted roughly $4.5 million from Nagy since April 2024 to guarantee a “peaceful stay in the Russian Federation.”8Newsweek. SafeMoon Florida Man Crypto Fraud Russia FSB The FBI and Justice Department have declined to comment on efforts to apprehend him.
The SEC Civil Action
On the same day as the criminal indictment, the SEC sued SafeMoon LLC, SafeMoon US LLC, Nagy, Karony, and Smith in the Eastern District of New York, alleging violations of the registration and anti-fraud provisions of the Securities Act of 1933 and the anti-fraud and market-manipulation provisions of the Securities Exchange Act of 1934.9SEC. SEC Litigation Release LR-25888
The civil complaint is broader in scope than the criminal one. Where the Justice Department focused on Karony’s personal theft of more than $9 million, the SEC alleges the defendants collectively misappropriated over $200 million in crypto assets, spent on luxury homes, McLaren sports cars, and travel. The SEC further alleges that Karony and Smith propped up the token price by making large purchases with misappropriated assets after the April 2021 crash and that Karony engaged in wash trading.2SEC. SEC Charges SafeMoon and Top Executives With Fraud The case is ongoing.
The Bankruptcy and the $100 Million Adversary Suit
SafeMoon US LLC filed for Chapter 7 bankruptcy in the District of Utah on December 14, 2023, listing assets between $10 million and $50 million and liabilities of no more than $500,000.10Bloomberg Law. Crypto Project SafeMoon Files for Bankruptcy After US Lawsuit Chapter 7 Trustee Ellen E. Ostrow was appointed to liquidate the estate and pursue recoveries.
The trustee sold the bulk of the company’s cryptocurrency to an offshore trading partner for $15,393,900, sold operating assets for $350,000, and sold certain token assets for $150,000. By December 2024, the estate held roughly $17.8 million in cash. Approximately 1,171 creditors filed claims totaling roughly $91 million by the July 22, 2024 bar date.11Stretto. SafeMoon US LLC Bankruptcy Filings
On December 12, 2025, Ostrow filed an adversary complaint in the Utah bankruptcy court against Nagy, Karony, Smith, social media personality Jake Paul, and YouTuber Ben Phillips. The suit alleges misappropriation, embezzlement, and fraudulent transfers, claiming the former executives used shell companies to steal company funds for real estate, vehicles, and luxury goods. The trustee is seeking to recover at least $100 million.12Bloomberg Tax. SafeMoon Trustee Sues Ex-Officers, Influencers Over Transfers
The Investor Class Action
Investors sued before the government did. A February 2022 class action filed in the Central District of California, brought by lead plaintiffs Bill Merewhuader, Christopher Polite, and Tim Viane, named the SafeMoon executives along with celebrity “Promoter Defendants” including Jake Paul, Nick Carter, Soulja Boy, Ben Phillips, and Lil Yachty, alleging they had inflated the token’s price through misleading endorsements.13ClassAction.org. Merewhuader et al. v. SafeMoon LLC et al. That case was terminated by October 2022.
The surviving investor litigation is Combs et al v. SafeMoon LLC et al., Case No. 2:2022cv00642, in the District of Utah. In September 2025, Trustee Ostrow proposed a $12 million settlement fund covering everyone who bought SafeMoon tokens between March 8, 2021, and November 1, 2023, along with separate settlements of $200,000 with Jake Paul and $90,000 with Daniel Keem. Proceeds would be distributed pro rata, calculated by subtracting what a claimant received from selling tokens from the amount originally paid.14Justia. Combs et al v. SafeMoon LLC et al., Order on Settlement
On March 30, 2026, Judge David Barlow denied preliminary approval without prejudice. The court found the settlement amounts appeared fair, reasonable, and adequate, but the plaintiffs had not provided enough information to show the proposed class could be certified. The settlements have not been resubmitted as of mid-2026.14Justia. Combs et al v. SafeMoon LLC et al., Order on Settlement
Where the Cases Stand
Karony is serving his 100-month sentence and has appealed. Smith is awaiting sentencing. Nagy remains a fugitive. The SEC civil case continues. The Chapter 7 bankruptcy is active, with docket entries running through May 2026 that include a settlement with Amazon Web Services over an administrative claim and Karony’s substitution of bankruptcy counsel.15Stretto. SafeMoon US LLC Court Docket The trustee’s $100 million adversary case against the founders, Jake Paul, and Ben Phillips is pending. Investors waiting on the class action recovery will need to watch for a renewed motion for preliminary approval in the Utah court.