The former CEO of a crypto company that defrauded investors has been sentenced to more than eight years in prison in New York.
Following a three-week trial, the former CEO of Utah-based SafeMoon US LLC, John Karony, was convicted last year on various charges, including conspiracy to commit securities fraud, wire fraud and money laundering.
Now, a U.S. district court judge has sentenced Karony to 100 months in prison, and ordered him to forfeit US$7.5 million and two residential properties. Investor restitution will be determined at a future hearing.
U.S. authorities alleged that investors were defrauded in a scheme that, starting in early 2021, ultimately raised US$8 billion from investors on promises that SafeMoon’s smart contracts would tax every transaction in its digital tokens, generating added tokens for the company’s liquidity pools.
While investors were told that the liquidity pools were “locked” and could only be used to facilitate trading in the tokens, authorities alleged that Karony and his co-conspirators had access to the liquidity pool tokens, and ultimately misappropriated millions of dollars worth of them.
“Karony and his co-conspirators retained access to the SafeMoon liquidity pools and used that access to intentionally divert and misappropriate millions of dollars’ worth of tokens for their personal benefit,” U.S. authorities alleged, adding that they attempted to hide these transactions through complex routing.
One of Karony’s co-conspirators pled guilty to conspiracy to commit securities fraud and wire fraud last year, and is awaiting sentencing. Another co-conspirator remains at large.
In a parallel civil proceeding, the U.S. Securities and Exchange Commission also charged SafeMoon, Karony and two others with alleged securities law violations.