The SEC Charges SafeMoon for Violating Security Rules and Committing Fraud
The decentralized finance project SafeMoon has been charged by the United States Securities and Exchange Commission (SEC) for violating security rules and committing fraud. In March, SafeMoon was exploited, resulting in a net loss of $8.9 million in BNB (BNB).
Funds on the Move via Centralized Exchanges
Funds associated with the exploit have been transferred through centralized exchanges (CEXs), making it crucial for law enforcement agencies to track them. Match Systems, a blockchain analytic firm, believes that using CEXs allows hackers to confuse their paths and buy time.
Exploiting SafeMoon’s Vulnerability
Match Systems conducted an analysis of the SafeMoon smart contract and discovered that the hacker exploited a vulnerability related to the “Bridge Burn” feature. This allowed them to transfer tokens from other users to their own address. As a result, 32 billion SFM tokens were sent from SafeMoon’s liquidity pool address to the hacker’s address.
Inflated Price Pump and Transfer of BNB
The transfer of tokens caused an instant pump in their value, which the exploiter took advantage of by swapping some SFM tokens for BNB at an inflated price. This resulted in 27,380 BNB being transferred to the hacker’s address.
Speculations of Insider Involvement
The smart contract vulnerability was introduced in a new update on March 28, leading to speculations of insider involvement. These speculations gained more fuel as the SEC filed charges against SafeMoon and three of its executives, accusing them of fraud and securities law violations.
Charges Against SafeMoon Executives
The SEC alleges that the CEO of SafeMoon, John Karony, and the chief technical officer, Thomas Smith, embezzled investor cash and withdrew $200 million in assets from the company. The executives are also facing charges from the U.S. Justice Department for wire fraud, money laundering, and securities fraud.
Movement of Funds via CEXs
The hacker initially claimed to have mistakenly exploited the protocol and offered to return 80% of the funds. However, the funds linked to the exploit have since moved through CEXs like Binance multiple times. Tracking these movements on CEXs is crucial for law enforcement agencies in their efforts to apprehend the perpetrators of the exploit.
Hot Take: SafeMoon Faces SEC Charges for Security Violations and Fraud
The decentralized finance project SafeMoon has found itself in legal trouble as it faces charges from the United States Securities and Exchange Commission (SEC). The exploit in March resulted in a significant loss, and now SafeMoon is accused of violating security rules and committing fraud. This case highlights the importance of security measures in the crypto space and serves as a reminder for investors to exercise caution when participating in decentralized finance projects. It remains to be seen how this legal battle will unfold and what consequences it will have for SafeMoon and its executives.
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