The SafeMoon token, affiliated with decentralized finance protocol SafeMoon (SFM), experienced a steep 31% drop in five hours after the company filed for Chapter 7 bankruptcy. The formal filing for “liquidation bankruptcy,” as recorded in the U.S. Bankruptcy Court for the District of Utah, occurred on December 14. Attorney Mark Rose filed a voluntary petition, and Chief Judge Joel T. Marker was assigned to the case.
A letter purportedly written by the company’s chief restructuring officer was released on Reddit, citing bankruptcy as the reason for its inability to pay employee wages prior to filing. The letter instructed employees to file claims in bankruptcy court for unpaid wages.
The setback follows U.S. securities regulators charging SafeMoon founder Kyle Nagy, along with CEO John Karony and CTO Thomas Smith, with violating securities laws last November, calling it a “massive fraud scheme.”
Following the bankruptcy filing, the cryptocurrency plummeted from $0.000065 to $0.000045 on December 14 in a five-hour period, according to a report by CoinGecko. However, it rebounded to $0.000061 in 10 minutes. SFM is currently trading at $0.00005729, reflecting a 31% decline immediately following the bankruptcy filing.
The token’s current value is a significant decline of 98.2% from its highest price of $0.0033 on January 5, 2022. Its market capitalization, once $1 billion, has now plummeted to $34.5 million.
Former SafeMoon supporters expressed their displeasure on Reddit, accusing the developers of performing a rugpull. Employers have lamented the losses, highlighting the warning signs they claim exist, including many staff being abruptly dismissed despite working without pay for a month.
SafeMoon suffered another setback due to abuse in March, resulting in a net loss of $8.9 million.