Files for Chapter 7 bankruptcy have been filed by the decentralized financial protocol SafeMoon. The native token of the system, SFM, collapsed by almost 40% in the hours after the filing on December 14, 2023.
Critics have accused SafeMoon of being a “pump and dump” operation, and the company has been the subject of inquiry and controversy for months prior to this filing.
In order to pay off creditors, debtors who file for Chapter 7 bankruptcy, which is often called a “liquidation bankruptcy,” have their nonexempt assets sold. For companies and people who are having trouble keeping up with their monthly payments, this is a viable option.
Filing a petition with the bankruptcy court initiates the procedure, which ultimately leads to the discharge of debts. A debtor’s assets, obligations, present income, and expenses, as well as a financial statement, must be submitted.
The Department of Justice filed charges against SafeMoon executives John Karony (CEO) and Thomas Smith (CTO) for a variety of fraud-related offenses, including money laundering, securities fraud conspiracy, and wire fraud conspiracy, leading to their arrest on November 1, 2023.
All of these accusations originate from claims that the SFM offering was materially misrepresented, that assets that were supposedly “locked” were used for personal needs, and that investors were misled.
Only hours before the filing, a Reddit user claimed to have captured a letter that the company’s chief restructuring officer allegedly wrote. The letter goes into more detail about how the company’s bankruptcy has impacted its salary obligations. Workers would “need to file a claim in the bankruptcy case” to get their unpaid salaries, according to the leaked letter.
On hearing of the insolvency, the value of the SafeMoon (SFM) token dropped from $0.000065 to $0.000045. Since reaching a peak of $0.0033 on January 5, 2022, this is a significant decline. Accordingly, SafeMoon’s market value has dropped from around $23.2 million to $1 billion.
According to statistics from CoinGecko, the SFM coin has lost 38.5% of its value in the last 24 hours and is now trading at $0.00004024.
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