The most scandalous fraud scheme in decentralized finance has reached a major milestone. Thomas “Papa” Smith, former chief technology officer of the now-defunct SafeMoon project, quietly pleaded guilty on Thursday to conspiracy to commit securities fraud and conspiracy to commit wire fraud in a federal court.
The Rise and Fall of SafeMoon
Launched in 2021 by CEO Braden John Karony, CTO Smith, and “Safemoon Dev” Kyle Nagy, SafeMoon was a DeFi token that implemented a unique mechanism: a 10% transaction fee, with 5% redistributed to existing holders and the rest burned. The model attracted massive speculation, sending the project’s market capitalization to a peak of $8 billion.
But behind the hype, the three co-founders had been quietly siphoning millions from the protocol. In November 2023, the U.S. Securities and Exchange Commission (SEC) charged them with fraud, alleging they had stolen $200 million from investors. SafeMoon filed for bankruptcy the following month.
Karony and Smith initially fought the charges, while Nagy fled to Russia. According to Newsweek, Nagy paid $4.5 million to secure a peaceful stay there.
Smith's Guilty Plea and Potential Deal
Smith’s sudden change of heart has led to widespread speculation that he is cooperating with prosecutors in exchange for a lighter sentence. His guilty plea covers both securities fraud and wire fraud conspiracy, charges that could carry up to 20 years in federal prison.
Investigative journalist Stephen Findeisen, known as “Coffeezilla,” who spent months exposing the fraud long before the SEC filed charges, commented: “Three years ago we exposed SafeMoon’s fraud. They told their community it was just ‘FUD.’ Today their CTO pled guilty.”
Compensation Efforts and Future
SafeMoon’s remnants were acquired by Web3 gaming firm VGX Foundation, which launched a SafeMoon memecoin as a way to compensate victims. However, critics question whether a newly created token can meaningfully offset the $200 million in losses.
CEO Karony’s trial is still pending, and Nagy remains at large in Russia. Smith’s sentencing hearing is expected in the coming months, potentially closing one chapter of a saga that has become a cautionary tale in the crypto industry.