The founders of a cryptocurrency once touted by Barstool Sports founder Dave Portnoy have been accused of defrauding investors and using their money to buy real estate and a stable of high-end cars including a custom-made Porsche.
The Justice Department and the Securities and Exchange Commission filed suit on Wednesday against three tech moguls behind SafeMoon, the crypto token that saw a 19,000% gain in its value during the digital currency boom of 2021.
The defendants in what the DOJ called a “multimillion-dollar fraud” were named as software developers Thomas Smith, Kyle Nagy, and Braden Karony.
Smith was arrested in New Hampshire on Wednesday while Karony was arrested in Utah the same day, according to federal prosecutors in Brooklyn. Nagy remains at large.
“As alleged, the defendants deliberately misled investors and diverted millions of dollars to fuel their greedy scheme and enrich themselves by purchasing a custom Porsche sports car, other luxury vehicles and real estate,” US Attorney Breon Peace said.
“As fraudsters increasingly use digital assets to mislead investors and misappropriate funds, our Office will be at the forefront of pursuing them and their ill-gotten gains.”
SafeMoon, whose market capitalization grew to some $8 billion in 2021, was touted by Portnoy, who told his fans that he invested $40,000 in the digital currency.
“Turns out it was a Ponzi scheme after all,” Portnoy wrote on his X social media account on Wednesday, admitting that he made a “huge f–k up.”
Since Portnoy’s investment, the value of SafeMoon has tanked by more than 99%.
In August of last year, Portnoy took to social media and posted a screenshot of his digital wallet showing that his original $40,000 SafeMoon investment was worth around $2,400.
According to a lawsuit, SafeMoon “enlisted” Portnoy and other celebrities to promote the cryptocurrency.
The lawsuit cited a May 2021 video that Portnoy posted to his social media account.
“If it is a Ponzi, get in on the ground floor,” Portnoy told his social media followers in the May 2021 clip.
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