PLEASANT GROVE, Utah (ABC4) — A Utah cryptocurrency company that once had a market capitalization of over $8 billion filed for bankruptcy Thursday after three executives were arrested on fraud-related charges last month.

Top executives of the Pleasant Grove-based company, SafeMoon LLC, were arrested in November for allegedly misappropriating millions of dollars of investors’ funds, according to the U.S. Attorney’s Office in the Eastern District of New York.

Documents show the company filed for bankruptcy in the Utah District under Chapter 7, meaning its assets, which include cryptocurrency and intellectual property ranging between $10 to $50 million, will be liquidated and distributed to its creditors.

The crypto technology company quickly came to success after it launched its crypto tokens, called ‘SFM,’ in 2021. In just a few months, the company had a market capitalization of billions of dollars, according to documents.

ORIGINAL: Utah Business ‘CEO of the Year’ accused of misappropriating millions of dollars

The scheme involved “locked” liquidity pools that were supposed to automatically increase due to the mandatory tax on every SFM transaction. Company executives told investors the pools were locked to prevent “rug pull,” a type of crypto fraud.

However, prosecutors say the company’s leaders did access SFM liquidity pools and used them to divert millions of dollars of tokens from the liquidity pools for their own gain. They also allegedly bought and sold SFM for personal benefit, which was contrary to what they told SFM investors.

Company executives John Karony, Kyle Nagy, and Thomas Smith were charged last month for allegedly perpetrating this “massive fraudulent scheme,” documents say.

“As alleged, the defendants deliberately misled investors and diverted millions of dollars to fuel their greedy scheme and enrich themselves by purchasing a custom Porsche sports car, other luxury vehicles and real estate,” said U.S. Attorney Breon Peace of the Eastern District of New York.

Officials say the three suspects were charged with conspiracy to commit securities fraud, conspiracy to commit wire fraud, and money laundering conspiracy.

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Charges are allegations only. All arrested persons are presumed innocent unless and until proven guilty beyond a reasonable doubt.

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