SafeMoon: The $200M 'Locked' Pool Lie That Sent Its CEO to Prison

On 10 February 2026, in a federal courtroom in Brooklyn, Judge Eric Komitee sentenced Braden John Karony, the former chief executive of SafeMoon, to 100 months in prison. Prosecutors had asked for 12 years. Karony, who had insisted on his innocence through a trial the previous May, was also ordered to forfeit about $7.5 million, including two houses. "Karony lied to investors from all walks of life," said Joseph Nocella Jr., the US Attorney for the Eastern District of New York.

The lie at the centre of the case was a simple one. SafeMoon, a crypto token launched in March 2021, told buyers that the pool of money backing its trading was "locked" and that nobody, not even its own team, could take it. According to the Securities and Exchange Commission, the people running the project withdrew crypto assets worth more than $200 million. Karony personally took more than $9 million, the Justice Department said, and spent it on a $2.2 million house in Utah, further homes in Utah and Kansas, a $277,000 Audi R8, a second Audi R8, a Tesla, a custom Ford F-550 truck and a Jeep Gladiator.

Three men were charged. One is in prison. One pleaded guilty and testified against him. The man who created the token is living in Russia.

The promise: a pool nobody could touch

A token is a digital chip issued on a blockchain, a public ledger that records who owns what. SafeMoon's chip ran on Binance Smart Chain, a network built by the exchange Binance, and it was created by Kyle Nagy, a programmer who posted under the name "SafeMoonDev". Every time someone bought or sold it, a 10% fee was taken. Half went to existing holders, like a dividend paid out of other people's trading. The other half went into a liquidity pool.

A liquidity pool is the float a market maker keeps on hand so that anyone can buy or sell instantly: a pile of SafeMoon tokens on one side and real money (BNB, the Binance network's own currency) on the other. Whoever controls that pool can empty it, which is how most crypto "rug pulls" happen. Promoters pull the cash out and leave buyers holding tokens nobody will pay for. To reassure buyers, SafeMoon said its pool was locked, the equivalent of money held by an escrow agent that no director can withdraw. It also said insiders were not trading the token.

The pitch worked. According to the SEC, the price rose more than 55,000% between 12 March and 20 April 2021, and the total value of all tokens passed $5.7 billion; the Justice Department put the peak above $8 billion and the holders in the millions. Celebrities and YouTubers, Jake Paul among them, promoted it on social media to people who had never bought a share.

What was really happening

Large parts of the pool were never locked. On 20 April 2021, when that became public, the price fell by nearly half in a day, the SEC said. Prosecutors argued it was the start of what they called a slow rug pull: Nagy, Karony and Thomas Smith, the chief technology officer, kept access to the pool and moved tokens and money out of it for themselves.

Smith had joined on 8 March 2021 and brought Karony in to run operations. Karony, who had previously run a small video game studio, became chief executive and the public face of the project to its online following, the self-styled "SafeMoon Army". According to the SEC, after the April crash Karony and Smith used misappropriated assets to buy SafeMoon and prop up the price, and Karony used an account on a trading platform to buy and sell the token to himself, a practice known as wash trading that makes a market look busier than it is. In public, the team denied that insiders were trading at all.

Prosecutors said the money was routed through several wallets and pseudonymous exchange accounts to hide where it went. Testimony reported by the crypto news site Protos described roughly $5 million of pool money going into a company founded by Karony's mother, and Smith receiving more than $2 million in assets.

The trial in Brooklyn

The FBI arrested Karony in Utah on 1 November 2023, the same day the Justice Department unsealed an indictment and the SEC filed a civil fraud case. Smith was arrested too. Nagy was not found. Smith pleaded guilty in February 2025 to conspiracy to commit securities fraud and wire fraud, and became the government's star witness.

Karony's trial opened in early May 2025 in the Eastern District of New York. His lawyer, Nicholas Smith (no relation), argued that there was no conspiracy: the team argued among itself, and Karony had not written the original claims about the locked pool, which came from Nagy. The jury did not accept it. On 21 May 2025, after deliberating for less than a day, it convicted Karony on all three counts: conspiracy to commit securities fraud, wire fraud and money laundering. Together they carried up to 45 years. The jury also voted to forfeit two residential properties.

The sentence and the money

The 100-month sentence came with three years of supervised release after prison. Restitution, the money a convicted person must repay victims (as opposed to forfeiture, which hands assets to the government), was left for later. A hearing was set for 23 April 2026, and in May the legal news service MLex reported that Judge Komitee had ordered Karony to pay more than $3.3 million. Against more than $200 million taken, and losses spread over tens of thousands of buyers, it is a small number.

Karony filed a notice of appeal in late February 2026, MLex and Bloomberg Law reported. The appeal goes to the US Court of Appeals for the Second Circuit. No ruling has been reported.

Nagy, Smith and what is still open

Thomas Smith, who lived in New Hampshire, is still waiting to be sentenced; no date had been reported by October 2026. The judge will weigh the help he gave prosecutors.

Kyle Nagy is the only one of the three never to appear in an American court. In April 2026 Systema, the Russian-language investigative unit of Radio Free Europe/Radio Liberty, reported that he had moved his family to a beachfront villa in Dubai in the months before the indictment, then to Moscow in April 2024 with the help of a Russian businessman, Aleksandr Kopenkin. The two later fell out, and Nagy filed a theft complaint with Russian police. The United States and Russia have no extradition treaty, and the FBI and Justice Department declined to comment. He remains charged and wanted.

The money is now being chased through civil courts as well. On 12 December 2025 Ellen Ostrow, the trustee who runs SafeMoon's bankruptcy, sued Nagy, Karony, Smith, members of Karony's family and promoters including the YouTubers Jake Paul and Ben Phillips in the US Bankruptcy Court for the District of Utah, seeking at least $100 million. Those are allegations, not findings. The SEC's own case has been on hold while the criminal case ran. What happened to the token itself, and to the people still holding it, is told in the Crypto Graveyard.