SafeMoon, the memecoin that gained popularity in March 2021 for its mission to serve the “unbanked” population and provide decentralized financial services, has recently filed for Chapter 7 bankruptcy, also known as “liquidation bankruptcy.” The voluntary petition was submitted by Attorney Mark Rose to the United States Bankruptcy Court in the District of Utah, with Chief Judge Joel T. Marker assigned to oversee the case.
SafeMoon (SFM) operates on the BNB Smart Chain and imposes a 10% transaction fee on its token, also named SafeMoon. Out of this fee, 5% is redistributed to token holders, while the remaining 5% is directed towards wallets holding a different cryptocurrency called Binance Coin (BNB), controlled by the creators of SafeMoon. SafeMoon is recognized for its slogan “Safely to the Moon.”
Previously, SafeMoon offered various decentralized applications (dApps) within its ecosystem, enabling users to engage in the DeFi revolution and exchange cryptocurrencies without intermediaries.
Before filing for bankruptcy, the project introduced a Migration Completion Program. This program aimed to assist users who were unable to successfully migrate their SafeMoon V1 tokens to SFM V2 by offering them a secure, instant, and automatic migration process to SFM V2 tokens.
However, despite its achievements, the project has encountered controversy and legal issues. The Securities and Exchange Commission (SEC) and Department of Justice (DOJ) have charged SafeMoon LLC, its creator Kyle Nagy, CEO John Karony, and CTO Thomas Smith with fraud and the unregistered offering of crypto securities.
According to the SEC, the defendants allegedly misrepresented the safety of the liquidity pool, which was utilized for trading liquidity. Furthermore, it is claimed that the defendants misappropriated significant portions of the liquidity pool. As a result, the price of SafeMoon’s token experienced a drastic decline of nearly 50% on April 20, 2021.
Moreover, there is a purported letter circulating on Reddit, allegedly from the firm’s chief restructuring officer. According to this letter, bankruptcy was the main cause for the company’s failure to meet its wage obligations to employees. The letter advises employees to file claims in bankruptcy court to recover their unpaid wages.
After the bankruptcy filing, SafeMoon’s cryptocurrency experienced a significant drop from $0.000065 to $0.000045 within a short five-hour period. This represents a decline of over 98.2% from its peak value of $0.0033 on January 5, 2022, resulting in a decrease in market capitalization from $1 billion to $34.5 million.
In response to these developments, supporters of SafeMoon have accused the company of deception and expressed frustration with the developers. This may lead to a more intense legal battle between users and the company’s leaders, as well as between employees and the company’s leaders.
