The SafeMoon token, a prominent player in the realm of decentralized finance (DeFi), has endured a dramatic 31% plunge within just five hours.
This abrupt downturn was triggered by the revelation that the company responsible for SafeMoon had submitted a Chapter 7 bankruptcy filing.
On December 14, SafeMoon initiated its bankruptcy process by officially filing for Chapter 7, also known as “liquidation bankruptcy,” with the United States Bankruptcy Court for the District of Utah overseeing the case.
Attorney Mark Rose filed the voluntary petition, and Judge Joel Marker was designated to preside over the proceedings.
A purported letter from the firm’s chief restructuring officer surfaced on Reddit, shedding light on the company’s dire financial straits.
The letter explained that the bankruptcy filing had rendered the company unable to meet its employee payroll obligations, advising employees to file claims in the bankruptcy court for unpaid wages.
This unfortunate development follows closely on the heels of the U.S. Securities and Exchange Commission (SEC) charging SafeMoon, its founder Kyle Nagy, CEO John Karony, and CTO Thomas Smith with violating securities laws. The SEC characterized their actions as part of “a massive fraudulent scheme.”
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SafeMoon’s token (SFM) witnessed a sharp decline from $0.000065 on December 14 at 8:24 pm UTC to $0.000045 over a five-hour period following the bankruptcy news, according to CoinGecko.
However, it displayed a brief resurgence, rebounding to $0.000061 within a rapid 10-minute span. Presently, SFM is trading at $0.00005729, reflecting a staggering 98.2% drop from its peak price of $0.0033 on January 5, 2022.
Furthermore, its once-impressive $1 billion market capitalization has dwindled to a mere $34.5 million.
Former SafeMoon supporters have expressed their frustrations on Reddit, accusing the SafeMoon developers of perpetrating a rug-pull scam.
Reddit users lamented their losses and cautioned against holding any hope for SafeMoon’s resurgence.
Santiago Melgarejo, a former nonfungible token analyst and sales specialist for SafeMoon, acknowledged that warning signs were apparent from the beginning, especially when numerous employees were abruptly laid off despite working for a month without receiving their salaries.
It’s worth noting that SafeMoon had previously fallen victim to an exploit in March, resulting in a net loss of $8.9 million.
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