SafeMoon CEO Seeks Dismissal Citing DOJ's New Crypto Directive

Braden John Karony, the CEO of SafeMoon, has made a new attempt to dismiss the case against him and his firm by citing the US Department of Justice’s recent directive to no longer pursue certain crypto charges. In an April 9 letter to New York federal court judge Eric Komitee, Karony’s attorney, Nicholas Smith, argued that the court should consider an April 7 memo from US Deputy Attorney General Todd Blanche. This memo disbanded the DOJ’s crypto unit and stated that the DOJ “will no longer pursue litigation or enforcement actions that have the effect of superimposing regulatory frameworks on digital assets.” Blanche also directed prosecutors not to charge violations of securities and commodities laws when the case would require the DOJ to determine if a digital asset is a security or commodity when charges such as wire fraud are available.

Karony’s counsel noted an exemption to the DOJ’s new directive would be if the parties have an interest in defending that a crypto asset is a security. However, Karony’s counsel added that “Karony does not have such an interest.” This argument comes after the Justice Department and the Securities and Exchange Commission filed simultaneous charges of securities violations, wire fraud, and money laundering against Karony and other SafeMoon executives in November 2023. The government alleged that Karony, SafeMoon creator Kyle Nagy, and chief technology officer Thomas Smith withdrew assets worth $200 million from the project and misappropriated investor funds.

This is not the first time Karony has attempted to get the case dismissed. In February, he asked for a delay in his trial, which was scheduled to begin on March 31, arguing that President Donald Trump’s proposed crypto policies could potentially affect the case. Later in February, Smith changed his plea to guilty and admitted to participating in the alleged $200 million crypto fraud scheme. Nagy is currently at large and is believed to be in Russia. SafeMoon filed for bankruptcy in December 2023, a month after it was hit with twin cases from the SEC and DOJ. The firm was also hacked in March 2023, with the hacker agreeing to return 80% of the funds.

The latest move by Karony’s legal team highlights the ongoing legal battles and regulatory challenges faced by the crypto industry. The DOJ’s decision to disband its crypto unit and refocus its enforcement efforts could have significant implications for other crypto-related cases. The outcome of Karony’s case will be closely watched by industry participants and regulators alike, as it could set a precedent for how digital assets are treated under the law. The DOJ’s new directive indicates a shift in its approach to regulating digital assets, focusing more on traditional criminal charges rather than imposing regulatory frameworks. This change could influence how future cases are handled and may provide a basis for other defendants to challenge existing charges. The legal community and industry stakeholders will be closely monitoring the developments in Karony’s case to understand the broader implications for the crypto industry.