SafeMoon Faces SEC Charges Following $8.9M Exploit; Insider Involvement Suspected
Summary:
Decentralized finance project SafeMoon and its top executives face charges from the U.S. Securities and Exchange Commission for security rules violations and fraud following a $8.9 million exploit in March. The money, tracked moving through centralized exchanges, has generated interest from law enforcement agencies. After a detailed analysis, blockchain analytic firm, Match System, discovered a vulnerability in the SafeMoon smart contract that the hacker exploited. Speculation of insider involvement has arisen due to the timing of the exploit and a recent system update. SafeMoon CEO and CTO face additional charges for embezzling funds and assets from the company.
Decentralized finance project SafeMoon encountered an exploit in March leading an $8.9 million loss in BNB. Now, the project and its key members face charges from the U.S. Securities and Exchange Commission (SEC) for violations of security rules and fraudulent activities. Monitoring firm Match System has traced the movement of the exploited funds through centralized exchanges, drawing attention from law enforcement agencies. Match System’s Sean Thornton suggested the use of these exchanges could be part of a strategy to confound attempts at tracking the lost money.
Considering the difficulty in tracking money through centralized exchanges without law enforcement involvement, Match System believes hackers may have used them as a buffer zone to create confusion and buy time. Match System’s analysis of the SafeMoon smart contract revealed a breach associated with the "Bridge Burn" feature. Attackers took advantage of this loophole to move tokens from other users to the developer's address. This mass movement led to a sudden rise in the token value, enabling the hacker to swap SFM tokens for BNBs at a higher price, leading to the $8.9 million loss.
This particular vulnerability had not been present in the earlier version and came in with an update on March 28, the day the exploit happened. This timing led to speculation about insider involvement. The SEC later charged SafeMoon and three executives with fraud and securities law violations, bolstering these suspicions. Thornton stated that evidence suggests potential involvement of SafeMoon management in the hack. However, whether this was intentional or due to irresponsible behaviour needs to be clarified by law enforcement agencies.
SafeMoon's CEO, John Karony alongside CTO, Thomas Smith, allegedly pocketed investor funds and extracted $200 million in assets from the company. Additionally, they are facing charges from the Justice Department for alleged conspiracy to commit wire fraud, money laundering, and securities fraud.
The individual who claimed to have unintentionally exploited the protocol proposed returning 80% of the funds, and since then, the exploited funds have been frequently relocated via centralized exchanges like Binance. This activity, according to the monitoring firm, could prove vital for law enforcement agencies in tracking down the perpetrators. Read more to learn about Huawei NFTs, Toyota's hackathon, and North Korea against Blockchain in this edition of Asia Express.
Published At
11/2/2023 11:59:19 AM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.