SafeMoon was previously a cryptocurrency craze that wowed retail investors in early 2021. The initiative promised breakthrough tokenomics with “reflection” incentives, attracting millions through viral social media campaigns.
Today, SafeMoon is practically extinct, having filed for Chapter 7 bankruptcy in December 2023 and facing criminal charges. Former CEO Braden John Karony was convicted on all charges in May 2025 following a 12-day trial, bringing a stop to what investigators described as a huge fraud enterprise.
This article describes the collapse of SafeMoon, its present position, and the tax ramifications for remaining token holders.
Is SafeMoon Dead in 2025?
SafeMoon is unquestionably dead in 2025, both technically and legally. In December 2023, the corporation filed for Chapter 7 bankruptcy, effectively halting all operations and corporate activities. Most exchanges have delisted SafeMoon, making it nearly impossible to purchase SFM tokens. The project doesn’t have an active development team, operational products, or legitimate leadership.
In May 2025, a federal jury convicted CEO Braden John Karony on all counts of securities fraud, wire fraud, and conspiracy to launder money. He faces up to 45 years in jail for his involvement in the multimillion-dollar fraud scam. Co-founder Kyle Nagy escaped to Russia and is still at large, while CTO Thomas Smith faces pending criminal allegations.
There is almost no legitimate trading volume or development activity on the blockchain right now. The SafeMoon community has mostly disintegrated, with former members either abandoning cryptocurrency outright or shifting to other projects. The few exchanges that still list SafeMoon have extremely little liquidity, making it nearly impossible to liquidate positions at any acceptable price.
SafeMoon's Rise and Fall
The Hype Cycle
SafeMoon burst onto the cryptocurrency scene in March 2021 with aggressive social media marketing activities. Celebrity sponsorships from Jake Paul, Lil Yachty, and other influencers helped the token gain widespread notice. SafeMoon’s market valuation peaked at more than $17 billion just months after its establishment. The project’s innovative tokenomics guaranteed holders automatic “reflection” payouts merely for owning SFM tokens.
The marketing strategy focused on new crypto investors who were unfamiliar with DeFi mechanics. SafeMoon’s team pushed the concept of “diamond hands” while discouraging selling with severe transaction costs. They claimed breakthrough products including SafeMoon Exchange, SafeMoon Wallet, and the enigmatic “Project Phoenix.” The 10% transaction fee structure distributes incentives among existing holders and liquidity pools, resulting in artificial scarcity.
Social media initiatives established a loyal community known as the “SafeMoon Army” on platforms such as TikTok, Twitter, and Reddit. This viral marketing strategy effectively acquired millions of new cryptocurrency users. However, the tremendous growth was based solely on promises and speculation, rather than functional items or actual utility.
Red Flags and Early Criticism
Experienced crypto analysts detected multiple red signals during SafeMoon’s launch that were overshadowed by retail excitement. Tokenomics resembled a traditional Ponzi scheme in which early investors profit from new buyer entry. The 10% transaction charge rendered SafeMoon utterly unworkable for actual money use. Critics pointed out the team’s lack of transparency on their professional backgrounds and technical qualifications.
SafeMoon’s roadmap included vague promises that lacked clear deadlines, technical specifications, or deliverable milestones. “Project Phoenix” was constantly referred to as revolutionary technology, but the team never supplied specific information. Independent smart contract audits uncovered serious weaknesses and centralised control mechanisms. Despite claims that liquidity pools were “locked” and inaccessible, the team maintained full control over them.
Federal investigators then uncovered that executives repeatedly deceived investors regarding the security of frozen liquidity while secretly accessing these assets. The continuous delays in product releases, along with the team’s evasive responses to technical concerns, revealed a glaring fraud. These warning indicators were obvious to experienced investors, but were overshadowed by retail enthusiasm and social media hype.
Major Events That Led to the Collapse
The SafeMoon V1 to V2 migration in December 2021 signalled the start of a systematic breakdown. The migration process was purposefully complex, resulting in severe value loss for those who did not migrate successfully. Users that did not move within certain times risked 100% transaction taxes, effectively confiscating their tokens. This move restarted the project while keeping the same underlying difficulties and extractive methods.
In November 2023, federal agents arrested CEO Braden John Karony, CTO Thomas Smith, and founder Kyle Nagy on allegations of securities fraud, wire fraud conspiracy, and money laundering. Prosecutors accused officials of misappropriating millions of dollars in investor assets while publicly asserting that liquidity pools were secure and unavailable. The BitMart exchange attack in December 2021, which resulted in a $200 million loss, highlighted SafeMoon’s security flaws.
Karony was convicted of all charges in May 2025 after prosecutors proved systematic fraud and theft of investor funds. Evidence revealed that Karony utilised stolen investor monies to buy fancy items while lying about the security of locked liquidity. SafeMoon filed for Chapter 7 bankruptcy in December 2023, conceding that the project was financially insolvent and could not continue operations.
What This Means for Investors
Current SafeMoon token holders should view their investment as entirely worthless, with no realistic recovery possibilities. The Chapter 7 bankruptcy petition and criminal charges proved SafeMoon’s status as a fraudulent operation from the start. Most legitimate exchanges have permanently delisted SafeMoon, making it nearly impossible to sell the remaining tokens at a reasonable price.
Given the criminal character of the deception and the bankruptcy procedures, recovery through legal channels is exceedingly unlikely. Bankruptcy courts usually prioritise secured creditors over token holders, who are deemed unsecured investors with few rights. Criminal restitution proceedings can take years to complete and frequently recoup just a small portion of losses. Class-action lawsuits have been launched, but have historically resulted in small reimbursements after legal fees.
Investors should be wary of recovery scams targeting SafeMoon victims explicitly. Fraudsters frequently target unsuccessful cryptocurrency project victims with bogus “recovery” services or “class action” scams. Any new ventures claiming affiliation with SafeMoon or offering to “revive” the token should be regarded as potential fraud. Legitimate blockchain projects rarely emerge from convicted fraud schemes or bankruptcy procedures.
Tax Implications of Holding or Selling SafeMoon
Despite the project’s bankruptcy and fraud conviction, SafeMoon transactions continue to be subject to ordinary cryptocurrency tax restrictions. Investors who sold SFM tokens at a loss can offset their capital losses with profits from other assets. The IRS considers cryptocurrencies to be property; therefore, investors can deduct realised losses of up to $3,000 per year from ordinary income.
Documenting SafeMoon transactions for tax purposes is difficult owing to complicated tokenomics and various migration occurrences. According to current IRS guidelines, the V1 to V2 migration is considered a taxable exchange, which may result in additional reporting duties. Reflection incentives acquired while owning SafeMoon are taxable income at fair market value, independent of the project’s subsequent collapse.
Conclusion
SafeMoon is one of cryptocurrency’s most visible cautionary tales about the significance of careful due diligence. The project’s ultimate failure highlights how viral marketing and community enthusiasm can trump fundamental red flags and fraudulent activities. With the CEO convicted of all fraud charges and the company bankrupt, SafeMoon will be officially dead in 2025, with no credible recovery chances.
Future cryptocurrency investors should approach meme currencies and projects with ambiguous fundamentals with extreme caution and rigorous analysis. Legitimate cryptocurrency initiatives have transparent teams, create working products, and offer strong value propositions beyond speculative trading. The SafeMoon example demonstrates why regulatory oversight and robust investor protection measures are still required in the changing crypto world.
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