SafeMoon CEO Braden John Karony is using the recent change of U.S. Department of Justice (DOJ) policy in the context of a new campaign to get the federal court case against Karony dismissed. In a letter sent on April 9, U.S. District Judge Eric Komitee Karony’s lawyer claimed that the DOJ’s decision to eliminate its crypto-focused enforcement department undermines the legitimacy of the allegations against him and other SafeMoon employees.
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DOJ No Longer in the Crypto Enforcement Business?
Legal action comes as a reaction to the memo of April 7 by the Deputy Attorney General Todd Blanche, which explicitly declared that the DOJ will no longer seek enforcement actions that enforce regulatory frameworks over digital assets. Blanche’s memo stated that “The Department of Justice is not a digital assets regulator,” and instructed federal prosecutors not to file commodity or securities charges when traditional criminal charges for fraud, like wire fraud, can be used.
Karony’s legal counsel seized the decision, saying this weakens the state’s argument. “Karony does not have an interest in defending that a crypto asset is a security,” his lawyer, Nicholas Smith, wrote in an accompanying footnote. This is important because the DOJ’s latest stance permits an exemption only when an entity wants to argue the status of crypto assets as a security, which is what Karony appears not to.
Background: The SafeMoon Saga
Karony, as well as SafeMoon’s company creator, Kyle Nagy, and former CTO Thomas Smith, were charged in November 2023 with a variety of federal crimes, which included wire fraud, securities violations as well as money laundering. The prosecution alleges that the trio swindled 200 million dollars in investment money for personal gain in essence, essentially siphoning money from the SafeMoon project.
This case follows an entire year of uncertainty for the ailing crypto company. SafeMoon announced its bankruptcy in the month of the year 2023 in December, a month after the DOJ as well as the Securities and Exchange Commission (SEC) filed joint charges. The project was also hacked in the month of March 2023. SafeMoon also experienced an extensive hacking attack, however, the hacker eventually agreed to pay back 80 percent of the stolen money.
The dramatic development was that Thomas Smith changed his plea to guilty on February 20, 2024. Smith admitted his involvement in the plot. In the meantime, Nagy remains at large and may be hiding in Russia.
Political Strategy Meets Legal Defense
Karony’s current motion to dismiss comes after an earlier move in February to defer the beginning of his trial, which was originally scheduled to begin on March 31. Then Karony’s legal team suggested that the former president’s proposed crypto regulations, if Trump is elected again, may influence how the lawful procedures in the Karony trial are conducted.
What Happens Next?
Karony’s argument is tied to the Department of Justice’s policy. change, which could be a strategically sound angle that may be taken advantage of in the meantime, as Washington struggles over how to govern digital assets. The court’s acceptance of the new arguments remains to be determined, but it is a sign of how fast-changing digital currency policy has a direct impact on high-stakes legal fights.
In the course of how the SafeMoon investigation unfolds, the case acts as a litmus test of the wider crypto industry’s legal framework, in which the boundary between innovation and fraud is still unclear and fiercely debated.
