EXCLUSIVE: Ex-SafeMoon CTO admits rug pull, details insider exemptions

“As soon as I start asking you to trust me, you shouldn’t.” That was Thomas “Papa” Smith’s pithy summation today of the fundamentally fraudulent nature of SafeMoon, a DeFi protocol whose centralized contract features allowed a core team to extract tens of millions of dollars from liquidity pools (LP) it had represented as sacrosanct. Smith testified for the third consecutive day in the trial of John Karony, former SafeMoon CEO.Smith, Karony, and SafeMoon creator Kyle Nagy are charged with wire fraud, securities fraud, and money laundering in connection with SafeMoon, which thrived for just a scant few months in 2021 before evidence of embezzlement emerged.Smith has pleaded guilty to the charges and is cooperating with government prosecutors.This morning, he detailed an array of deceptions and backdoors allegedly used to defraud investors. Prosecutors shared a series of 2021 “Ask Me Anything” (AMA) videos recorded by Karony, Smith, and Ben Phillips, an influencer paid by SafeMoon to promote the currency.In those videos, Smith and Karony described how revenue from SafeMoon transactions on exchanges like BitMart would be directed back to a Pancakeswap liquidity pool.Smith testified that in reality, he “never observed” the recapture of these funds. The BitMart funds were paid out in USDT, a stablecoin not compatible with SafeMoon’s Pancakeswap pools.He further described being sent $500,000 worth of SafeMoon tokens by Nagy, tokens Smith said would have been “acquired from the liquidity pool.” Such withdrawals are at the heart of the charges against Karony, who prosecutors say misled investors about the use and availability of funds in the liquidity pool.John Karony trial starts with a confused witness and SafeMoon merchRead more: Arbitrum, Optimism, and Base are fighting over $52 billion DeFi pieKarony’s defense is attempting to make the case that he was transparent.In AMAs and tweets presented in evidence, Karony stated that the LP could be tapped as a “last resort” for operational costs, but Smith testified today that “it was used for things that were not emergencies.”Smith also detailed an “exclude from tax” function only available to the controller of the main SafeMoon contract wallet, which was used to exempt insiders’ wallets from the 10% fee on all transactions that was the core of SafeMoon’s value proposition. In the most striking testimony of the morning, Smith recalled the transformation he experienced after receiving the $500,000 worth of SafeMoon from Nagy.“Previously to all of that, I had a very strong moral compass... After I had the money, I stopped asking questions. I cared deeply about the amount that I had.“I became that monster I was talking about.”Got a tip? Send us an email securely via Protos Leaks. For more informed news, follow us on X, Bluesky, and Google News, or subscribe to our YouTube channel.The post EXCLUSIVE: Ex-SafeMoon CTO admits rug pull, details insider exemptions appeared first on Protos.