The U.S. Department of Justice (DOJ) announced on May 21 that Braden John Karony, chief executive officer of the digital asset firm Safemoon LLC, was found guilty by a federal jury in Brooklyn on all three charges in a crypto-fraud case involving the misappropriation of investor funds. Safemoon filed for Chapter 7 bankruptcy in December 2023 after the U.S. Securities and Exchange Commission (SEC) charged it and its executives with fraud.

Karony and his co-conspirators were accused of deceiving Safemoon investors about the accessibility and use of the project’s liquidity pool. As prosecutors explained: “The defendant agreed with his co-conspirators to lie to Safemoon investors about whether Safemoon executives could access the liquidity pool and whether they were using the assets from the liquidity pool for their personal benefit.” The DOJ detailed:

As Safemoon’s market capitalization grew to more than $8 billion, the defendant fraudulently diverted and misappropriated millions of dollars’ worth of liquidity from the Safemoon liquidity pool for their personal benefit.

The case was tried over 12 days before U.S. District Judge Eric R. Komitee. “When sentenced, Karony faces up to 45 years in prison. The jury also issued a verdict to forfeit one residential property and the proceeds from the sale of another residential property, amounting to approximately $2 million,” the Justice Department noted.

Federal officials revealed that Karony exploited investor trust while pretending Safemoon’s infrastructure offered safeguards it did not. Prosecutors established that the executives maintained secret access to the liquidity pools, which were promoted to the public as “locked” and secure from manipulation.

In reality, the funds were used to finance an extravagant lifestyle. United States Attorney Joseph Nocella stated:

As proven at trial, the Safemoon digital asset was anything but safe and turned out to be pie in the sky for investors who were deliberately misled by Karony, a man who sought to get rich quick by stealing and diverting millions of dollars.

“Karony used his scheme to purchase multiple homes, sports cars, custom trucks, and other luxury goods. Today’s guilty verdict should serve as a warning to all would-be fraudsters that my Office will vigorously prosecute individuals like the defendant who victimize digital asset investors and undermine investor confidence in digital assets markets, thereby threatening the stability and growth of these emerging technologies,” Nocella added.

According to investigators, Karony laundered the illicit gains through pseudonymous exchange accounts and private wallets, attempting to cover his tracks. He reportedly acquired over $9 million from the scheme and spent the proceeds on a $2.2 million property in Utah, other residences in Utah and Kansas, and high-end vehicles including multiple Audi R8s, a Tesla, and custom Ford and Jeep trucks. Law enforcement emphasized that the fraudulent conduct involved deliberate concealment and manipulation of cryptocurrency transactions. While Karony awaits sentencing, his associate Thomas Smith has already pleaded guilty, and another co-conspirator, Kyle Nagy, remains at large.

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