Prosecutors Press On With SafeMoon CEO Fraud Case Despite DOJ Policy Shift

Federal prosecutors have declared their intention to continue pursuing the case against Braden John Karony, the former CEO of the cryptocurrency firm SafeMoon. This decision comes despite a recent memo issued by the Department of Justice (DOJ) that has raised questions about the prosecution of certain crypto-related cases. Prosecutors informed a federal judge in Brooklyn of their plans to move forward with the investor fraud case against Karony.

The DOJ memo, issued on April 7 by Deputy Attorney General Todd Blanche, suggests a policy shift towards abandoning “regulation by prosecution” related to digital assets. This memo has sparked debate within legal circles, as it advises prosecutors to consider the potential impact on innovation and the broader crypto industry before proceeding with charges. However, the prosecutors handling Karony's case have made it clear that they believe the evidence against him is strong enough to warrant continued legal action.

Karony faces serious charges, including securities fraud conspiracy, wire fraud conspiracy, and money laundering conspiracy. Prosecutors allege that between 2021 and 2022, Karony diverted and misappropriated millions of dollars’ worth of the platform’s SFM token. Karony's legal team had previously argued for a delay in the trial, citing potential changes in securities laws enforcement under the Donald Trump presidency. However, the judge denied this motion and ordered jury selection to begin on May 5.

Karony's legal team had hinted at potential policy changes under the Trump administration, suggesting that the DOJ might direct jurisdictions not to pursue many crypto enforcement cases. This came after the Securities and Exchange Commission (SEC) dismissed cases and dropped investigations into many crypto firms facing allegations of violating securities laws. The SEC, under the leadership of Mark Uyeda, has taken a more permissive approach to digital assets, dropping cases against firms like Ripple Labs, Coinbase, and Kraken.

The SEC has also launched a crypto task force headed by Commissioner Hester Peirce to explore a regulatory framework for digital assets and issued a memo stating that memecoins are not securities. This shift in approach has been criticized by some, who argue that it endangers the financial system by abdicating the SEC's mission of investor protection. However, the DOJ's decision to proceed with Karony's case suggests that prosecutors are committed to holding individuals accountable for alleged wrongdoing, even in the face of evolving legal guidance.

Whether Trump’s appointees in the Justice Department intend to step in and move to halt Karony’s case remains unclear. At the time of publication, the former SafeMoon CEO was set to go to trial in May and has been free on a $3 million bond since February 2024. He has pleaded not guilty to all charges. The outcome of this case will be closely watched, as it could set a precedent for how crypto-related cases are handled in the future. The legal landscape for crypto-related cases is continuing to evolve, with prosecutors and regulators grappling with the unique challenges posed by this emerging technology.