Safemoon, the popular cryptocurrency project that promised to revolutionize the industry, has announced that it is filing for chapter 7 bankruptcy. This means that the project will be liquidated, and its assets will be distributed among its creditors.
The announcement came as a shock to many investors who had hoped that Safemoon would recover from its recent troubles, such as the departure of its CEO, the hacking of its wallet, and the regulatory scrutiny from various authorities. Safemoon had claimed to be a deflationary token that rewarded holders with passive income and burned a portion of every transaction. However, critics had accused it of being a Ponzi scheme that relied on constant inflow of new buyers to sustain its price.
According to the bankruptcy filing, Safemoon owes more than $200 million to its creditors, including exchanges, developers, marketing agencies, and legal firms. The filing also reveals that Safemoon has less than $10 million in assets, most of which are in its own token. The value of Safemoon has plummeted by more than 99% since its all-time high in April 2021, making it virtually worthless.
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The bankruptcy news has sparked outrage and disappointment among the Safemoon community, many of whom have lost their life savings by investing in the project. Some have blamed the team for mismanagement and fraud, while others have blamed themselves for falling for the hype and not doing enough research. Some have even expressed suicidal thoughts and asked for help on social media.
Why did Safemoon collapse?
SafeMoon was a cryptocurrency project that launched in March 2021 and quickly gained popularity on social media, thanks to its innovative mechanism of rewarding holders and burning tokens. However, the project soon faced a series of challenges and controversies that led to its downfall. In this blog post, we will explore the reasons why SafeMoon collapsed and what lessons can be learned from its failure.
One of the main reasons why SafeMoon collapsed was that it was accused of being a fraudulent scheme by the U.S. Securities and Exchange Commission (SEC). The SEC filed a complaint against SafeMoon and its executive team in December 2021, alleging that they violated federal securities laws by conducting an unregistered offering of digital assets and making false and misleading statements to investors.
The SEC claimed that SafeMoon raised over $1.5 billion from more than 2.5 million investors worldwide but failed to disclose the risks and costs associated with its tokenomics model, such as the 10% fee imposed on every transaction.
The SEC also alleged that SafeMoon’s liquidity pool was not locked as claimed, and that its executives diverted millions of dollars from the pool to their personal accounts or to other projects. The SEC’s complaint triggered a massive sell-off of SafeMoon tokens, which resulted in a 40% price drop in one day.
Another reason why SafeMoon collapsed was that it faced multiple class-action lawsuits from disgruntled investors who claimed that they were deceived by the project and its celebrity promoters. Two different groups of investors filed lawsuits against SafeMoon and its endorsers, such as rapper Lil Yachty, YouTuber KEEMSTAR, and boxer Jake Paul, accusing them of engaging in a “pump and dump” scheme.
The lawsuits alleged that SafeMoon and its promoters artificially inflated the price of the token by hyping it up on social media, and then dumped their holdings when the price reached its peak, leaving the investors with worthless tokens.
The lawsuits also claimed that SafeMoon and its promoters violated various state laws by failing to register their offering of securities, disclosing material information, and acting in good faith. The lawsuits sought damages for the losses suffered by the investors, as well as injunctive relief to prevent further harm.
A third reason why SafeMoon collapsed was that it lost credibility and trust among its community and the wider crypto industry. SafeMoon’s reputation was tarnished by several scandals and controversies that exposed its lack of transparency, professionalism, and competence. For example, SafeMoon’s chief technology officer left the project in November 2021, citing personal reasons, but later revealed that he had been threatened by other members of the team.
He also accused SafeMoon’s CEO John Karony of mismanaging the project and lying to the public about its progress and partnerships. Moreover, SafeMoon’s website was hacked in October 2022, resulting in the leak of sensitive data of over 500,000 users, including their email addresses, passwords, wallet addresses, and transaction histories.
Furthermore, SafeMoon’s ambitious plans to launch its own exchange, blockchain, wallet, NFT marketplace, wind turbines, and expansion in Africa were met with skepticism and criticism from experts and analysts who questioned their feasibility and viability.
SafeMoon collapsed because it failed to deliver on its promises and expectations, and because it faced legal actions and reputational damage from various stakeholders. SafeMoon’s story serves as a cautionary tale for investors who are interested in investing in cryptocurrencies and DeFi products. It also highlights the need for more regulation and oversight in the crypto space to protect consumers from fraud and deception.
The fate of Safemoon serves as a cautionary tale for anyone who is interested in investing in cryptocurrency projects, especially those that promise unrealistic returns and have no clear use case or roadmap. While there are many legitimate and innovative projects in the crypto space, there are also many scams and failures that prey on the naive and greedy. Investors should always do their own due diligence and never invest more than they can afford to lose.
Crypto market is showing signs of ticking along sideways for remainder of 2021
Meanwhile, the crypto market has been experiencing a prolonged period of low volatility and sideways movement, which is likely to continue until the end of the year. This is according to a recent report by CoinDesk, which analyzed the historical trends and current indicators of the major cryptocurrencies.
The report found that the average daily volatility of Bitcoin, Ethereum, and Litecoin has been declining since the peak in May 2023, when the market experienced a sharp correction.
The volatility index, which measures the standard deviation of daily returns, has dropped from over 8% in May to around 3% in December for Bitcoin, from over 12% to around 5% for Ethereum, and from over 16% to around 6% for Litecoin.
The report also noted that the correlation between the top three cryptocurrencies has increased, meaning that they tend to move in the same direction more often. The correlation coefficient, which ranges from -1 (perfectly negative correlation) to 1 (perfectly positive correlation), has risen from around 0.6 in May to around 0.8 in December for Bitcoin and Ethereum, and from around 0.5 to around 0.7 for Bitcoin and Litecoin.
These trends suggest that the crypto market is in a consolidation phase, where traders are waiting for a clear signal or catalyst to break out of the current range. The report identified several potential factors that could influence the market direction in the near future, such as:
- The launch of Bitcoin futures ETFs in the US, which could increase the institutional demand and liquidity for Bitcoin.
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The transition of Ethereum to a proof-of-stake consensus mechanism, which could reduce the supply and environmental impact of Ethereum.
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The adoption of Litecoin as a payment option by major retailers and platforms, such as Walmart and PayPal, which could boost the utility and popularity of Litecoin.
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The regulatory developments and legal challenges in different jurisdictions, which could affect the risk and compliance of crypto assets.
The report concluded that the crypto market is showing signs of maturity and resilience, as it has survived several shocks and uncertainties in 2021. However, it also warned that the market is still subject to high volatility and unpredictability, as new events and innovations could trigger significant price movements at any time. Therefore, investors and traders should be cautious and well-informed when entering or exiting the crypto market.