Federal Prosecutors to Continue Case Against Former SafeMoon CEO
Federal prosecutors have announced their intention to persist with legal proceedings against Braden John Karony, the ex-CEO of the cryptocurrency company SafeMoon. This decision comes despite a recent memo from the U.S. Justice Department that proposed a shift away from “regulation by prosecution” concerning digital assets. In a filing dated April 18 in the U.S. District Court for the Eastern District of New York, U.S. Attorney John Durham stated his office has taken the April 7 memo from Deputy Attorney General Todd Blanche into account, but remains committed to moving forward with the trial against Karony. He faces serious allegations, including conspiracy to commit securities fraud, wire fraud, and money laundering, stemming from claims that he misappropriated millions of dollars’ worth of SafeMoon’s SFM token from 2021 to 2022.
Background of the Case Against Karony
Initially indicted in October 2023 by former U.S. Attorney for EDNY Breon Peace, Karony sought to postpone his trial in February, suggesting that potential changes in securities law enforcement during the Trump administration could impact the case. However, the judge rejected this request and set May 5 as the date for jury selection. Karony’s defense team had pointed to the SEC’s recent dismissal of several cases against various cryptocurrency firms, indicating a potential shift in enforcement. Blanche’s memo also hinted that under Trump, the DOJ might advise jurisdictions against pursuing numerous crypto-related enforcement actions.
Concerns About Changes in Regulatory Stance
Karony’s legal representatives expressed concern that the trial could reveal that the DOJ no longer classifies digital assets like SafeMoon as “securities” under the law. They warned that such revelations could occur either just before or during the trial, jeopardizing the foundation of the government’s case, which relies heavily on the assertion that SafeMoon is indeed a security.
Cryptocurrency Regulation Under the Trump Administration
Since Mark Uyeda was appointed as the acting SEC chair by Trump in January, the agency has retracted actions against several companies, including Ripple Labs and Coinbase. Additionally, the SEC has initiated a task force focused on establishing a regulatory framework for cryptocurrencies, stating that memecoins do not qualify as securities. These developments indicate a more lenient regulatory environment for digital assets compared to the stricter measures implemented under former chair Gary Gensler.
Implications of Regulatory Changes
Former SEC official John Reed Stark expressed concerns regarding Trump’s approach in an op-ed, arguing that by instructing the SEC to lessen its oversight role, the former president could be jeopardizing the integrity of the financial system. Stark questioned whether Trump’s motivations stemmed from a desire to appease crypto donors or personal financial interests, warning that such changes could have far-reaching consequences for investors and the economy as a whole.
Uncertainty Surrounding Karony’s Trial
It remains uncertain whether officials appointed by Trump within the Justice Department will intervene in Karony’s case, as they did in a corruption case involving New York City Mayor Eric Adams. As of now, Karony is scheduled to stand trial in May and has been released on a $3 million bond since February 2024. He has maintained his innocence against all charges brought against him.
