👁️ SafeMoon: God's Warriors Go To Court
CEO and crypto scammer John Karony is the kind of delusional freak I live for.
Today (Tuesday) marks the first full day in the criminal trial of John Karony, lately Braden Karony, the former CEO of SafeMoon. I will be covering the trial - I sat in for part of Jury Selection on Monday, and will be attending today as well (be sure to follow me on Twitter for live-ish updates). Today’s Dark Markets is mostly an introduction to SafeMoon - after just two quick items of interest.
How MLMs Work on Instagram and TikTok - A great overview of how Avon and similar parasitic organisms have transitioned very, very smoothly into the social media era, from Bridget Read, author of Little Bosses Everywhere, a book about MLMs that I’m excited to get my hands on.
Movement and Web3Port: Market Maker or Fraud Partner? - More to come on this one, but blockchain project Movement has had a very, very bad week after a series of pretty complex revalations about its “market makers.” In crypto, market makers are nominally just supposed to provide liquidity for a token they’re contracted to, but in reality, they’re often being paid to do straight-up market manipulation. But they’re also being paid at least in part with the token they’re supporting, so they have conflicting priorities - they want to both keep the price healthy, and also sell as much of the token as possible.
Movement seems to have signed a very bad deal with a very bad market maker, Web3Port, which immediately dumped 66m Movement tokens on the day they debuted on Binance. A co-founder named Rushi Manche has now been suspended thanks to his part in the affair. VC Mike Dudas, always a breath of fresh air, called out another Movement team member, Sam Thalapiya, saying Thalapiya was the only founder he’s ever “asked for my money back,” after discovering Thalapiya had allegedly used stolen IP to build the exchange Zebpay.
Listen to my Interview with Mike: Mike Dudas: Forward to Glory.
SafeMoon: God’s Warriors
I love going to fucking court. I love the smell of cold, officious, intimidating justice being dished out. I achieve this purity of heart by only attending the trials of insanely guilty people.
On Monday I woke up at the crack of 8 and eventually made my way to the Eastern District of New York courthouse for certainly the least interesting part of the trial of former SafeMoon CEO Braden John Karony: Jury selection.
I missed the official introduction of the defendant, so I’m only pretty sure it was Karony himself hovering behind his court-appointed lawyer, Nicholas Smith, taking notes in a subtly smarmy pantomime of participating in his defense. He is very tall, with the kind of gigantic square head I can’t comment on, and appears to have lost a lot of weight. He wore a genuinely fancy-looking and well-tailored suit. Living his best life.
Karony was arrested on October 31, 2023, and charged with securities, wire fraud, money laundering, and conspiracy. He was charged alongside Chief Technology Officer Thomas “Papa” Smith, a kind of Gollum-as-hippie-software-engineer type, and the coin’s visionary figurehead “creator,” Kyle Nagy. The trio had created a cryptocurrency that combined simple DeFi features with a tokenomic “tax” on transactions intended to “preserve value” by making it harder for holders to sell. They had formed a hype-driven cult, then allegedly stolen hundreds of millions of dollars from their investors, in ways that were hilariously traceable.
He looks good, but there’s also something about Karony that suggests he’s not taking any of this seriously. Like he can’t process that it’s real. Karony’s own father has apparently suggested he’s not the sharpest tool in the shed. He faces possible decades in prison. One of his charged co-conspirators has pled guilty, and the other one apparently fled to Russia. Taking this one to trial is a big swing.
His Instagram certainly suggests a tenuous relationship with reality.
This might just be a product of the bubble you live in when both of your parents are retired CIA officers.
Hacky, I know, but it’s genuinely relevant to the saga’s peak moment - when Karony gets into a protracted, high-dollar legal dispute with his own mother over a windmill development project in the Gambia.
As many good moments as it features, the SafeMoon saga played second fiddle in its own time: the 2021 peak of crypto hype, scams, and insanity, now receded (never over). SafeMoon whimpered to a halt by the end of 2022, alongside an entire squadron of one thousand percent more interesting fraudsters. This was when legends like Do Kwon walked the earth, convincing serious venture capitalists that he could print reliable offshore electronic U.S. dollars thanks to New Math. The age of Sam Bankman-Fried, who for a hot delusional second convinced the world to abandon mere human ethics and embrace money as the foundation of moral goodness.
The SafeMoon guys were Mormon scammers, offering a staggeringly simple and deeply flawed protocol, openly basing the company in the United States, and even walking around with titles like C.E.O. They paid awful influencers like Jake Paul to hype up the project. They seemed like used car salesmen. Frankly, you could tell within the length of a press release that this was not a brain trust.
Most importantly, they literally, directly stole money in very unsophisticated ways. Sam Bankman-Fried wasn’t great at the shell game, but he at least knew how to incorporate a shell corporation. The SafeMoon guys were just yeeting tokens out of a liquidity pool, which they publicly described as “locked” while saying “we would never rug you bro,” into wallets called “6ABE” and “0x666,” then selling the stolen loot on exchanges like (allegedly) Binance, Bitmart, and Coinbase.
But what do I know? They weren’t flashy, but they got rich anyway. Real lunchpail players, putting in the work.
You can see how the premise of SafeMoon would be compelling to many of the people caught up in that moment’s crypto craze for the first time, and having been misled by various cash-in media sources. Every transaction on the system was taxed at 10%, to discourage people from selling their SafeMoon. Of that haircut, 5% went to other SafeMoon holders, and 5% went to a fund that wasn’t supposed to be controlled by anyone.
You’ve probably recognized a problem with the economic design here. Even “Store of Value” cryptocurrencies like Bitcoin earned and retain their value not because of restrictions on trade, but because they’re turbo liquid, liquid in a way no other asset has ever been. The problem here is that the mechanism meant to discourage selling also reduces the token’s utility - for things like, you know, payments. A 10% tax on transactions doesn’t protect your value, it annihilates it, because you’ve made your currency useless for the thing currencies are for.
But who cares about that nerd shit, because the price of this coin was only ever driven by hype and community and rizz. Dave Portnoy bought $40,000 worth of SafeMoon.
The trial begins bright and early tomorrow, and is expected to run roughly to May 26. It promises absurd delights: Karony’s pretrial defense effort has relied substantially on the idea that because blockchain transactions are transparent, no fraud was committed, because users could have seen him withdrawing money. Which is simply not how these things work - fraud is about representations made by defendants, not the theoretical availability of information.
I’ll be covering the trial here and on Twitter, starting with tomorrow’s opening statements.
Notes and Ephemera:
2022 Class Action Against SafeMoon and Influencers - Uploaded by a staffer at Motherboard, Rest in Peace.
SafeMoon was largely unmasked by Coffeezilla, who three years ago funded the on-chain sleuthing to track the draining liquidity pool and weird contracts. Two of his videos on SafeMoon went very wide, and likely helped the prosecution substantially.
Safemoon V1 to V2 migration, 100% tax that was essentially a trap. Coffezilla’s on-chain investigator found that users had lost $102 million … which was collected in the liquidity pool, where it could have simply been withdrawn by the leadership team.
Influencers sued included Lil Yachty, Soulja Boy, and Jake Paul. Only the best people!
His current, court-appointed, lawyer was provided to Karony because prior lawyers weren’t paid, and Karony has seemingly alienated every possible source of support. The current lawyer has tried to withdraw, citing lack of time to prepare. The request was denied.
A shell company called Ronin Real Estate was set up to purchase Karony’s mansion and hide his name. This coverup quickly failed.
A CertiK audit, contracted by the company itself, flagged that the SafeMoon transaction contracts were set up to transfer LP tokens over time to the owner(s), making it possible for them to pull liquidity, aka “rugpull.”
Key Follows:
SystemsTng - Fraud hunter, might have been a victim, good insights
Here is a detailed thread on the fraud by STng.
Insiders/Former Insiders:
Barajally Group
- These folks got burned and are glad to see Karony go down for it.
Charles Karony - “VP of Special Projects” at Barajally Group - https://x.com/CharlesKarony/ - According to SystemsTng, this is John Karony’s adopted brother, and seems to hate him.
David B. Smith - “VP of Strategic Alliances” at Barajally Group - https://x.com/dbsmith2themoon - Purportedly Karony’s uncle, who has turned on him after the suit against Karony’s mother - David Smith’s sister.
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I love going to f***ing court.
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This reads slightly different to me from "I f***ing love going to court."
Note, both of the above censoring is mine. I'm not sure why I've been censoring lately. The only time I didn't in recent memory was to show my disgust for crypto lobbyists (and I now regret it, I might edit it). I think I saw the trend around me of censoring because others want to monetize for tiktok or whatever, but I liked the way censoring per simple character substition looked, if not the reason behind it. Because it looks civil. Civil compared to, say, the kind of tweets by someone that is "accused of rape, sexual assault, and sexual harassment, including non-consensual kissing or groping, by at least 25 women since the 1970s" and definitely needs to go to f***ing court.
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But who cares about that nerd shit, because the price of this coin was only ever driven by hype and community and rizz.
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Honestly the tax angle hadn't really be done before that in crypto. Of course we later find out it wasn't even a guarantee, it only really worked when the participating exchanges wanted it to (and it was a fork). Now, is as good a time as any to point out that I know these things as I am reading this substack the day after just accidentally finding and reading the protos article on the result of this trial: https://protos.com/long-read-how-john-karony-went-from-visionary-to-convicted-fraudster/ I didn't even know it was David Z Morris article until I openned it.
It was great, as expected. Highly recommend the read.
It's interesting how reading this substack now shows that DZM eventually softens a bit on his opinion of Karony, having seen his delusional joviality for weeks now. He doesn't soften a lot, he clearly still sees that this could be a carefully created persona of a nice guy. You can tell per the end of the article. It shows that despite some sympathy for the convicted fraudster, DZM has his conviction of ethics. But there is definitely sympathy--not excusing, but sympathy--in the article. Which is striking as you basically never read that from DZM about fraudsters.
But, anyway, the "nerd s***" is that the tax was pretty much a new thing for crypto followers. If you look really deeply at money, you start to lose grasp on reality. Like, wait, is the US Dollar really only backed by US military power? Then you think, well, anything could be money then. (I almost wrote "well, shoot, anything could be money" but Americans have too many guns and too lacking in critical thinking for me to write anything so flippantly.) The tax seemed like wizardry and definitely unique, so I can't blame too many people for being somewhat interested in at least experimenting with it.