In this lesson
- find out how SafeMoon's "reflection" tax and "locked liquidity" were supposed to protect holders
- understand what prosecutors say really happened to the liquidity
- learn how to check "locked liquidity" claims yourself
What happened to SafeMoon? SafeMoon was a token launched in March 2021 that charged a 10 % fee on every trade and promised that its liquidity was "locked", so nobody could run off with it. Its market value briefly passed 8 billion dollars. In November 2023 US prosecutors and the SEC charged its leaders with fraud: according to them, the liquidity was not really locked and insiders diverted millions. CEO Braden Karony was convicted by a jury in May 2025 and sentenced to 100 months in prison in February 2026.
The name promised two things: safety and the Moon. In the end, the token delivered neither – but it did teach millions of people a new phrase: "liquidity pool".
How SafeMoon was supposed to work#
SafeMoon ran on BNB Smart Chain and was one of the first big "reflection tokens" of the 2021 bull market.
- A 10 % tax on every buy and sell. When you bought or sold SafeMoon, 10 % of the amount was taken.
- Half went to holders ("reflection"). 5 % was shared among everyone who held the token – so just holding seemed to make your balance grow.
- Half went to liquidity. The other 5 % was added to the pool of liquidity on a decentralised exchange, which lets people trade the token.
- "The liquidity is locked." The team said this pool was locked, so the developers could not pull it out – the main protection against a rug pull.
The tax was also a clever psychological trick: selling cost you 10 %, so many people simply held – and the chart was spared big sell-offs. Celebrities and influencers promoted the token, and "HODL to the moon" became a lifestyle.
What prosecutors say really happened#
According to the US Department of Justice, a large part of the liquidity was not locked. The indictment said that SafeMoon's leaders had access to it and diverted funds worth more than 200 million dollars in total, spending them on things like luxury homes and sports cars. Karony himself, according to prosecutors, took more than 9 million dollars – including a 2.2 million dollar house in Utah and an Audi R8.
Meanwhile, the project had other problems. In March 2023 an attacker exploited a bug in a new SafeMoon smart contract and drained about 8.9 million dollars from the pool. In December 2023 the SafeMoon company filed for bankruptcy.
Timeline#
| Date | What happened |
|---|---|
| March 2021 | SafeMoon launches with a 10 % tax and "locked liquidity" |
| April 2021 | Hype on social media; the market value briefly passes 8 billion dollars |
| March 2023 | A bug in a new contract is exploited; about 8.9 million dollars is stolen |
| 1 November 2023 | DOJ and SEC charge CEO Braden Karony, CTO Thomas Smith and creator Kyle Nagy |
| December 2023 | SafeMoon US LLC files for bankruptcy |
| February 2025 | Thomas Smith pleads guilty and cooperates |
| May 2025 | A jury in Brooklyn convicts Karony of securities fraud, wire fraud and money-laundering conspiracy |
| 10 February 2026 | Karony is sentenced to 100 months in prison |
What happened to the people behind SafeMoon?#
- Braden John Karony, the CEO, was convicted in May 2025 and on 10 February 2026 was sentenced to 100 months (8 years and 4 months) in prison. He was also ordered to forfeit about 7.5 million dollars.
- Thomas Smith, the CTO, pleaded guilty in February 2025 and cooperated with prosecutors.
- Kyle Nagy, SafeMoon's creator, was charged in 2023 but, as of October 2026, he is still at large and has not been tried – he is accused, not convicted.
How to check "locked liquidity" yourself#
"Liquidity locked" is one of the most common promises in new tokens – and one of the easiest to fake with a screenshot. Before you trust it:
- Find the liquidity pool on a block explorer or a DEX analytics site and see who holds the LP tokens (the receipts for the pool).
- Check where they are locked – in a known locking contract, for how long, and how much of the pool.
- Check who can change the contract. An owner who can change fees, mint new tokens or move funds can undo any "lock".
- Look at the top holders. If a few wallets hold a large share, they can crash the price at any moment.
A promise of safety is not safety
Tokens with "safe" in the name, automatic rewards for holding and big fees for selling are built to keep you in, not to protect you. Never buy a token because someone says the liquidity is locked – verify it on the blockchain or skip it. And only put in money you are fully prepared to lose: new small tokens go to zero far more often than to the Moon.
Common myths#
- "Reflections are free money." The "rewards" came from other people's trading fees. When trading stopped, so did the rewards.
- "The tax protects the price." It only makes leaving expensive. It does not add any value to the project.
- "A big community means it is safe." SafeMoon had millions of holders and an army of fans. That did not stop prosecutors from finding fraud at the top.
Summary
- SafeMoon (2021) took a 10 % fee on every trade and promised locked liquidity; it briefly passed 8 billion dollars.
- According to US prosecutors, the liquidity was not really locked and insiders diverted more than 200 million dollars.
- CEO Braden Karony was convicted in May 2025 and got 100 months in prison in February 2026; CTO Thomas Smith pleaded guilty; creator Kyle Nagy is still at large.
- Verify "locked liquidity" on the blockchain yourself: LP tokens, lock time, contract owner, top holders.