The SafeMoon token, affiliated with the decentralized finance protocol SafeMoon (SFM), experienced a significant drop of 31% within five hours after the company filed for Chapter 7 bankruptcy. The official filing for "liquidation bankruptcy" occurred on December 14, as documented in the United States Bankruptcy Court in the District of Utah. Attorney Mark Rose filed the voluntary petition, and Chief Judge Joel T. Marker was assigned to the case.
A letter purportedly written by the firm's chief restructuring officer emerged on Reddit, citing the bankruptcy as the reason for the inability to pay employee wages before the filing. The letter instructed employees to file a claim in the bankruptcy court for their unpaid wages.
This setback comes on the heels of the United States securities regulator charging SafeMoon, along with its founder Kyle Nagy, CEO John Karony, and CTO Thomas Smith, in November for violating securities laws, labeling it a "massive fraudulent scheme."
Following the bankruptcy filing, the cryptocurrency saw a sharp decline from $0.000065 to $0.000045 on December 14 over a five-hour period, as reported by CoinGecko. However, it rebounded to $0.000061 within a rapid 10-minute span. Presently, SFM is trading at $0.00005729, reflecting a 31% decline immediately following the bankruptcy filing.
The token's current value represents a significant drop of 98.2% from its highest price of $0.0033 on January 5, 2022. The once $1 billion market cap has now plummeted to $34.5 million.
Expressing frustration on Reddit, former SafeMoon supporters accused the developers of conducting a rug-pull. Users lamented their losses, with some emphasizing the warning signs that were allegedly present, including the abrupt firing of many employees despite working for a month without pay.
SafeMoon faced another setback in March when it was exploited, resulting in a net loss of $8.9 million.
