Former SafeMoon Staff Warns of Red Flags After Firm Files for Chapter 7 Bankruptcy
SafeMoon, a once-popular decentralized finance (DeFi) protocol, filed for Chapter 7 bankruptcy on December 14th. The bankruptcy news comes just a month after the company and its executives were charged with fraud by the Securities and Exchange Commission (SEC).
The bankruptcy filing caps a dramatic downfall for a firm that just last year was touted by many as one of the hottest crypto projects. A letter surfaced on social media, purportedly written by SafeMoon’s chief restructuring officer, that explained employees would not receive further wage payments and urged them to file bankruptcy claims.
While sudden, SafeMoon’s bankruptcy comes on the heels of several troubling developments. In November, the SEC accused SafeMoon executives of misleading investors and operating an unregistered security offering.
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According to the SEC complaint, the price of the SafeMoon token increased substantially from March 12 to April 20, 2021. During this period, the token’s market capitalization rose above $5.7 billion. However, on April 20th, the price fell nearly 50% after information came to light that the promised liquidity pool locking had not taken place.
SafeMoon token nosedives after bankruptcy news
SafeMoon’s native token plunged 31% within hours of the bankruptcy announcement as investors rushed to cut their losses. According to CoinGecko, SFM is hovering around $0.00005733 at press time. SFM is currently down by 16% in the last 24 hours.
Santiago Melgarejo, an ex-employee of SafeMoon, put out a tweet highlighting the firm’s missteps in security practices. Melgarejo mentioned that the warning signs were notably there when many of the employees, including him, were abruptly fired over several weeks.
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“Transitioning to cybersecurity has opened my eyes to the critical missteps in SafeMoon’s security practices. Simple oversights, like not retrieving company equipment from former employees, expose alarming vulnerabilities, said Melgarejo.
With the firm filing for bankruptcy, the exact trajectory of what will happen to the SFM holders remains unclear.
