A new proposed class action outlines an alleged scheme in which a number of celebrities were recruited to misleadingly promote and sell SafeMoon tokens to unsuspecting cryptocurrency investors while several individuals behind the scenes turned a profit.
Among the defendants in the 60-page lawsuit are Jake Paul, Nick Carter, Soulja Boy, Lil Yachty and YouTuber Ben Phillips, who the complaint alleges played key roles in pumping up the SafeMoon cryptocurrency token V1 on social media and thus inflating its value. The lawsuit alleges that, in collaboration with these celebrity partners, the other defendants—SafeMoon LLC and its subsidiaries, SafeMoon founder and CEO Braden John Karony, and other top SafeMoon execs—marketed the token while failing to disclose their control over both the company and a significant amount of SafeMoon digital assets available for public trading.
The defendants’ intention behind the celebrity-driven marketing of the SafeMoon token was to eventually sell their holdings for a profit when numbers were high, the filing alleges.
According to the case, the defendants’ “pump and dump” strategy for the SafeMoon token was indeed a success, as the “misleading promotions” and celebrity endorsements artificially increased interest in and trading volume for the asset throughout 2021.
Meanwhile, investors who bought SafeMoon tokens between March 8, 2021 and the present have suffered economic harm on what ended up being, for them, “losing investments,” the suit alleges.
Be sure to scroll down to learn more about joining the lawsuit.
Lawsuit alleges the rug was slowly pulled out from under SafeMoon investors
Outlined in the complaint is an alleged multi-layered scheme that caused the price of the SafeMoon token to rise “astronomical[ly]” through 2021 only to bottom out by December 31 amid the departures of a number of executives under less-than-clear circumstances and the company’s failure to launch a much-touted wallet for its cryptocurrency.
As the case tells it, the defendants’ conduct over the last year amounted to a “slow rug pull” on investors, who time and again were inundated with encouraging statements about the purported value of SafeMoon tokens—and the promise of future success—while company execs and celebrity promoters slowly sold off their own holdings amid inflated trading volume.
By the end of 2021 and to date, the value of SafeMoon tokens has hit a floor from which it has yet to recover, the case relays.
“On December 31, 2021, the price of the SafeMoon Token hit a low of $0.0000006521 per token, an over 80% drop from its height during the Class Period, which it has not been able to recover,” the lawsuit reads. “As of the filing of this Complaint, the trading volume for the SAFEMOON Token has plummeted to around only $60,000.”
The bulk of the lawsuit, filed in California’s Central District Court on February 17, is dedicated to the plaintiffs’ blow-by-blow accounting of the SafeMoon token’s release and social media-driven rise last year to its decline into a seemingly worthless digital asset today.
To the moon . . . and back?
The SafeMoon token is a speculative digital token created in March 2021 by a group of cryptocurrency developers and investors, including defendants Karony, SafeMoon Chief Operating Officer Jack Haines-Davies, Global Head of Products Ryan Arriaga, Chief Technology Officer Hank Wyatt and SafeMoon representative Shaun Witriol. More specifically, SafeMoon tokens are blockchain-based digital assets known as “BEP-20 tokens” that are created through the Binance Smart Chain mainnet blockchain, the case explains.
Per the suit, SafeMoon’s name comes from the phrase “safely to the moon,” suggesting the value of the token is meant not only to rise but to do so safely. The asset was launched on March 8 on the decentralized cryptocurrency exchange Pancake Swap, with a transaction volume of $149,427, the complaint says.
Upon SafeMoon’s launch, company execs actively recruited and retained celebrities such as Paul, Carter, Soulja Boy, Lil Yachty and Phillips to promote the asset, primarily through Twitter, Reddit and YouTube, the case relays. In exchange for their support, the celebrity defendants received SafeMoon tokens and/or other considerations as compensation, the suit alleges.
Importantly, as the celebrity defendants signed on to “pump” SafeMoon tokens, the company began to make statements to investors about “token burns,” or the permanent removal of a certain number of tokens from the circulating supply, the lawsuit says. These “token burn” communications served to signal to investors that the value of the SafeMoon token would increase as more and more tokens were permanently “burned” from the overall supply, according to the case.
Less than a month after the token’s creation, SafeMoon announced on April 3, 2021 that nearly four trillion tokens were “burnt” and “gone,” with related communications stressing that the value of the asset was at an all-time high and that it would be “going to the ‘moon’ imminently,” the lawsuit says. According to the case, the trading volume for SafeMoon tokens shot up a staggering 875 percent within nine days of starting the defendants’ celebrity-driven marketing. Over the next 10 days, however, the SafeMoon token trading volume began to die down, dropping from $43.9 million on April 5 to an interim low of $8.9 million on April 15, the suit states.
At this point, the case says, SafeMoon execs, in an effort to inflate trading volume again, “went back to what worked previously: celebrity endorsements.” These measures were again successful and would, according to the lawsuit, “exponentially increase” the trading volume for SafeMoon tokens.
As the suit tells it, SafeMoon’s Twitter-focused promotional activities in mid-to-late April 2021 indeed caused the asset’s trading volume to explode again. By April 20, the volume ballooned to $144.7 million, then to $173.3 million the following day, before peaking at $191.6 million on April 22, according to the complaint.
Ultimately, the promotional efforts by the Company and Way, Witriol, and Carter caused a staggering 1,691% increase in trading volume between April 16, 2021 and April 22, 2021.”
The marketing push for SafeMoon tokens continued into May 2021 with a Times Square billboard and more Reddit, Twitter and YouTube posts, the case continues. Following a stretch of additional peaks and valleys, trading volume for SafeMoon tokens almost quadrupled by mid-August, from $11.4 million on August 14 to $43.7 million on August 16, the lawsuit relays.
According to the case, however, August 2021 would prove to be the last high point for SafeMoon’s value, in part because a much-touted event slated for the fall, the release of SafeMoon’s own crypto wallet, never came to pass.
SafeMoon V1 “wallet” fails to launch on schedule
Central to the lawsuit is the defendants’ promise to create a designated SafeMoon “wallet” in which investors would “have a better place” to hold their SafeMoon tokens. Karony advised as early as April 2021 that SafeMoon would be creating its own wallet in addition to making its own cryptocurrency exchange, the suit relays.
In May, Karony, the case says, “teased ‘all the features’” that were to be available with the SafeMoon wallet and promised to show the interface to investors. In June, Karony “unambiguously” touted that the SafeMoon wallet would be “one of / if not the strongest wallets on the market,” according to the suit. That same month, Karony affirmed that the SafeMoon team has “smash[ed]” its internal deadlines for the wallet, hinting at its seemingly imminent release, per the complaint.
As the lawsuit tells it, the rosy news around the forthcoming SafeMoon wallet helped stabilize the token’s trading volume. In the days leading up to the apparent launch, SafeMoon’s trading volume shot up more than 300 percent, according to the suit, from $13.5 million on August 19 to $54.6 million on August 28, the day the wallet was supposed to debut.
When 4:00 p.m. came and went on August 28 without the arrival of the SafeMoon wallet as promised, and when the wallet still did not appear over the next two days, the price of the SafeMoon token plummeted, the lawsuit says.
The price went from a high of $0.00000355 to a low of $0.0000014 (a 60.5% decrease).”
A September 6 tweet claiming that the SafeMoon wallet was “imminent” caused the price of the token to once again spike, this time by more than 200 percent, the case states. Three days later, however, Wyatt, SafeMoon’s CTO, announced his resignation on Twitter, according to the complaint. The lawsuit alleges Wyatt “knew or should have known” that the wallet launch would not take place within the company’s stated timeframe and sold his SafeMoon tokens to unsuspecting investors before additional delays to the wallet launch were uncovered and the price of the tokens took another blow.
The day after Wyatt’s resignation, Haines-Davies announced on Twitter that he would be stepping down as SafeMoon’s COO, speculatively as a result of the company’s failure to launch its wallet on schedule.
In the wake of Haines-Davies’ departure, the price of SafeMoon tokens sank once more, “going from a close of $0.000000153 on September 9, 2021 to the low for the day of $0.00000119 on September 10, 2021,” according to the case, adding that other execs subsequently left SafeMoon “under similar circumstances.”
The price of the SafeMoon token eventually hit rock bottom on December 31, 2021, the lawsuit says.
Who does the lawsuit look to represent?
The lawsuit looks to represent all individuals who bought SafeMoon tokens between March 8, 2021 and the present and were subsequently damaged as a result.
I own some SafeMoon tokens. Can I be added to the case?
Generally speaking, when a proposed class action suit is first filed, there’s nothing you need to do to “join” or be “added to” the case. It’s only if and when a lawsuit settles that someone covered by the litigation, who’s known as a “class member,” would need to act. This usually entails filing a claim form online or by mail. Should the lawsuit detailed on this page settle, “class members” will more than likely receive notice about it.
It is important to remember that class action lawsuits generally take time to work through the legal process, usually on their way to a settlement, dismissal or arbitration outside of court.
If you purchased SafeMoon tokens at any time since last March, or are generally interested in cryptocurrency class action lawsuits, sign up for ClassAction.org’s free weekly newsletter.