The defense for former SafeMoon CEO John Karony summarized its case late on Tuesday, May 20, hoping to cast doubt on prosecutors’ compelling evidence.
Karony is charged with conspiracy to commit wire fraud, securities fraud, and money laundering in connection with SafeMoon, a crypto token that saw a wild surge in popularity and market value in early 2021, at the peak of a crypto bull market rife with frauds.
Prosecutors have convincingly demonstrated that Karony misrepresented the mechanics of SafeMoon, including its purportedly “locked” liquidity pool and the flow of revenue from exchanges, including BitMart, which traded the token.
Nicholas Smith, Karony’s lead (and only) defense attorney, drew attention to what he argued were ambiguities and contradictions in the government’s claims.
These included the fact that Karony joined the SafeMoon organization after some of the deceptive messaging in question was created. Most notably, the SafeMoon Whitepaper was written by SafeMoon developer Kyle Nagy before Karony was hired as CEO — though the government has shown it retained misrepresentations for close to 10 months after Karony joined.
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Smith also revisited evidence that Karony didn’t understand crypto well at the time of many of his statements, declaring that “fraud isn’t just about intent, it’s about a level of knowledge.”
Some of Smith’s arguments were more of a stretch. In particular, he characterized SafeMoon posts displaying “locks” of large tranches of tokens as disclosures that the liquidity pool was not entirely locked, a theme Smith has reiterated throughout the trial.
Prosecution witnesses and evidence had shown these posts were meant to distract SafeMoon holders from negative news. They included transaction hash links to block explorers where, Smith argued, prospective investors could have seen that the pool was not fully locked.
Similarly, Smith played a clip from a SafeMoon team AMA that included a reference to discussions of locking the pool, and described this as “admitting the liquidity pool isn’t locked.”
Smith further argued that evidence of disagreement among SafeMoon executives, particularly about the proper treatment of the liquidity pool, meant there could have been no “conspiracy” among them.
“Conspiracy requires agreement,” Smith argued — though these disagreements seem mostly to have been brief speed bumps on the road to self-enrichment. Simultaneously, Smith argued that there could be no conspiracy between Karony and Safemoon CTO Thomas “Papa” Smith, because Smith (no relation) was taking orders from Karony.
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The attorney also argued that many of Karony’s statements characterized as fraudulent by prosecutors did not rise to that standard. Specifically, Smith argued that claims that SafeMoon was “safe” were not fraudulent because they did not contain specific “factual content.”
This is akin to “puffery” defenses that have been put forth in other fraud cases: if you’re trying to sell something, a degree of exaggeration or colorful language can be acceptable without crossing the line of fraud.
These arguments may have helped the defense plant seeds of doubt in the jury’s mind. We will most likely find out tomorrow, Wednesday, May 21, with the jury beginning deliberation first thing in the morning.
