The sensational federal trial of SafeMoon CEO Braden John Karony kicked off in Brooklyn, promising to be one of the most explosive DeFi crime showdowns of the year. Karony stands accused of masterminding a multimillion-dollar scheme under the guise of a “decentralized” finance token that defrauded over a million investors. With former CTO Thomas “Papa” Smith turning on him, founder Kyle Nagy reportedly hiding in Russia, and prosecutors pulling no punches, the SafeMoon case is poised to become a landmark in the U.S. government’s crackdown on crypto fraud.
Key Points:
- Trial began on May 5, 2025, in the U.S. District Court for the Eastern District of New York (EDNY); expected to run until May 26.
- John Karony faces charges of securities fraud conspiracy, wire fraud conspiracy, and money laundering.
- SafeMoon founder Kyle Nagy is a fugitive believed to be hiding in Russia, adding geopolitical tension to the case.
- Prosecution’s star witness: ex-CTO Thomas Smith, who has already pleaded guilty and is cooperating.
- Victim testimony underscores the devastating financial impact of the alleged fraud.
- Over $200 million allegedly siphoned from “locked” liquidity pools while misleading the public.
Short Narrative:
The U.S. government is making a major example out of John Karony, the flashy former CEO of SafeMoon, once hailed as a DeFi “moonshot.” With his trial now underway, prosecutors are laying bare a complex web of deceit, market manipulation, and insider greed that rivals the downfall of FTX.
SafeMoon, once boasting a market cap of $8 billion, is now a byword for retail investor betrayal. The DOJ and SEC are both pursuing the case aggressively, signaling no leniency for those who exploit DeFi’s regulatory grey zones.
Extended Analysis:
The trial, covered in part by FinCrime Observer, represents the U.S. Department of Justice’s (DOJ) and the U.S. Securities and Exchange Commission’s (SEC) latest coordinated offensive against crypto-related fraud—a legal theatre reminiscent of the Sam Bankman-Fried (FTX) takedown of 2023.
At the center is John Karony, who prosecutors allege orchestrated a “liquidity lock” deception. The SafeMoon project marketed its token (SFM) as secure, telling users that its liquidity was permanently locked and inaccessible—even to insiders. But as the trial reveals, this was far from the truth. Prosecutors argue that Karony and his associates retained access to the liquidity pool, using it as a private ATM to finance luxury lifestyles: think Porsches, Audi R8s, and multimillion-dollar properties across the U.S.
The drama deepened when former CTO Thomas Smith—once a cult hero in the SafeMoon community known as “Papa”—flipped. Smith confessed to coordinating the concealment of insider withdrawals and admitted that Karony directed him to manipulate token prices by creating artificial floors. His cooperation deal hints at a significant sentence reduction, but at a steep cost: becoming the prosecution’s prime weapon against Karony.
Adding international intrigue, Kyle Nagy, SafeMoon’s elusive founder, has reportedly fled to Russia. According to unverified reports circulating on X and FinCrime Observer, Nagy may have fallen under the influence of Russia’s FSB, effectively shielding him from extradition. His fugitive status injects a Cold War-style subplot into an already dramatic trial.
Karony’s defense strategy is to shift the blame, portraying himself as a latecomer to the project, unaware of prior deceptions. Via his X profile, Karony has cultivated a loyal fanbase claiming he’s being scapegoated—though others, including victims testifying in court, aren’t buying it. One such victim, William Maurer, told jurors how he lost $20,000 after trusting the promises made in SafeMoon’s whitepaper. “100% safety,” the paper claimed—Maurer’s bank account told another story.
With over $200 million allegedly misappropriated and investor losses mounting into the billions, the SafeMoon case could set a legal precedent. The SEC’s parallel civil suit charges Karony and others with unregistered securities sales—an argument that, if upheld, could shake the entire DeFi foundation by classifying similar token projects as securities.
Actionable Insight:
FinTelegram urges regulators, investors, and compliance officers to closely follow the Karony trial as a regulatory stress test for the DeFi sector. The case demonstrates how “decentralization” is often a myth used to evade accountability. It also shows that U.S. enforcement agencies, even under a Trump administration with a more crypto-friendly tone, are not turning a blind eye to fraud cloaked in blockchain hype. DeFi projects must prepare for tighter scrutiny and clarify internal governance to avoid similar fates.
Call for Information:
Were you affected by SafeMoon or another DeFi project? Do you have information about Kyle Nagy’s whereabouts or the laundering pathways used by the SafeMoon inner circle? Contact FinTelegram confidentially or via Whistle42.com.
