Dec 15, 2023

Crypto company SafeMoon filed for Chapter 7 bankruptcy on Thursday, as its executives face criminal charges in the U.S. SafeMoon’s SFM token tanked over 42% in the past 24 hours following the news.

Video transcript

The state of crypto is presented by Tron connecting the world to the power of Cryptocurrency. Good morning and welcome back to first mover. All right, crypto Company Safe Moon filed for chapter seven bankruptcy as its executives face criminal charges in the United States. Joining us now to discuss this coin desk, global policy and regulation, managing editor Nick Day who is also the editor of Coin Desk's state of crypto newsletter. Good morning, Nick. Good morning. All right, another bankruptcy take us, just lay the groundwork for us. Give us a little recap. I know the executives were arrested prior to this bankruptcy filing. What's happened up until now? Yeah. So Saint Moon is facing both civil and criminal allegations from the US SEC and the US Department of Justice. Um As you mentioned, the CEO and Chief technology Officer were arrested last month on charges of uh you know, the securities and wire fraud. Uh there allegedly stole millions from their investors, lied to their investors and misappropriated those funds for personal use. So those are the criminal charges. The SEC likewise uh alleging that uh they misappropriated some, I think about 200 million or so in funds from their investors. And um also clear alleging that the Safe and Token is an unregistered security. So all of that leads up to last night. Safe Moon, the company uh filed for chapter seven bankruptcy. So this is the liquidation bankruptcy. They plan to sell the assets. So Kyle Nagy, he, he was the creator of Safe Moon. He's still uh free. Correct. I mean, did, did they find him at last? I remember he was uh they didn't know where he was. Yeah, so they announced when they arrested the other two that he was still at large. I haven't seen any announcement saying that they have located or arrested him yet. So uh yeah, it looks like he's still at large, but he is also charged. And so the DOJ definitely wants to find him and uh say it alone. Maybe he's with Dow. Oh no, wait, never mind. He's not. I wanna check one airport. Yeah. So, so what, what happens now? II I mean, we're, we're gonna go through a lengthy trial, correct? So for the bankruptcy, maybe not like they are filing for chapter seven instead of a chapter 11 bankruptcy. So with the chapter 11 bankruptcies that we saw all these other crypto companies go under, uh you know, they plan to restructure, come back in some way, shape form um Chapter seven bankruptcies, they're going to liquidate the assets, pay off the, you know, debtors, uh which by the way, safely. And the, uh, paperwork said they only had between 50 100 debtors, uh, creditors rather, um, and only owed somewhere between $100,000 and half a million dollars. Uh, you know, their assets in comparison were well above that, that they claim. So this process shouldn't take as long as so these Chapter 11 bankruptcies that we've seen as far as the criminal trial goes, that one is still, you know, happened a month ago. So that was still in the very early stages. I think we'll wait and see until, uh, you know, we get a better sense of how they're gonna plead and, uh, how they're gonna approach, uh, you know, the next couple of months, but we'll get a better sense, uh, in the coming months back, how long this trial this case might take and whether or not they will end up in trial and interestingly enough, safe Moon Token still trades. It's down 42% but it's not down 99%. Yeah. Although the, I think the US dollar price is like, has like four or five zeros after the period. So that, that didn't stop, that didn't stop Dogecoin did it. There's a buyer for something that is true. That is extremely, very much true. Don't we all, don't? We all just love, love the things that happen in this industry. Nick humor me unpack some of the differences between Chapter seven and Chapter 11 bankruptcy. A lot of the bankruptcies we talk about on this show are chapter 11, what are some of the key differences? The main one is just kind of the approach. So, um you know, as I mentioned, they're gonna liquidate, they're gonna go for selling off the assets to repay the creditors. Uh That's gonna, you know, they're not, we're not gonna see, I don't think any kind of attempt at restructuring this company, they're not going to say, ok, well, you know, we can, you know, hold off on the debt collection for a little bit and do this, that and the other thing, we're gonna be able to bring safe move back as a company does not look like that's what we're trying to do here. Um Of course, the other thing is the executives have also been arrested already and uh aren't facing criminal charges. Uh So that's actually, I don't want to say it's totally unique, but we haven't seen that too often in the crypto space. A lot of these companies that went bankrupt, their executives if they were arrested. So namely Sam mccree, Alex Kinsky, they were arrested after the fact and the companies are still doing their things without those, you know. Um here it looks like they're gonna just, you know, once they get to it, they're gonna shut down all the day. Now what makes this uh how much of the assets are safe? Moon tokens? Because as you mentioned, uh J uh, uh, um, when, uh, Celsius had their issues, uh, their assets weren't safe. Moon Tokens. It wasn't necessarily just all, I mean, it was, it was Tokens like bit, uh Bitcoin e things like that. We're not looking the same way here with safe moon are we? How much of it is? Safe Moon's, uh token itself that they consider assets. So they haven't actually published the, uh first aid document the first day, uh first a declaration yet. So we don't know yet. Um It could well be that, you know, they're claiming between 10 and $50 million in assets. It turns out a significant chunk of that is in safe tokens, um might be worth, you know, a little bit less now. Uh It probably worked a lot less by the time we get around to wrapping this thing up. But um we're waiting, we'll be waiting for that filing to come out. That document is gonna have a better sense of what their actual asset account looks like. So far, all we've really seen is the first initial filing where to just check off the boxes saying like, ok, here's the ranges that we're looking at for, you know, the dollar amounts, the assets liabilities, the pres um But yeah, that's, I think something, maybe the most important thing most people are gonna be looking for when that first day declaration does come out just how much of the assets are safe Moon versus maybe other crypto tokens versus uh more tangible assets versus whatever, you know. All right, Nick, we are going to leave it there. We'll continue, continue watching what goes on with safe moons bankruptcy and we will see you again soon. That sounds good. That was Coin Desk, global policy and regulation managing editor Nick Day and don't forget to sign up for the state of crypto newsletter on

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