The company terminated all its employees following the filing.
Decentralized finance protocol SafeMoon has officially initiated Chapter 7 bankruptcy proceedings, according to a document filed at the U.S. Bankruptcy Court for the District of Utah on December 14.
The development comes after a tumultuous period in early November, where multiple federal agencies, including the Securities Exchange Commission (SEC) and Federal Bureau of Investigation (FBI), jointly accused the protocol’s personnel of securities fraud and criminality.
Following the allegations, the SEC charged SafeMoon founder Kyle Nagy, CEO John Karony, and CTO Thomas Smith in a $200 million lawsuit.
SafeMoon Files for Bankruptcy, Terminates Employees
While the bankruptcy filing doesn’t reveal many details on the events preceding the move, an undated letter reportedly written by SafeMoon to its employees painted a struggling company that could no longer pay wages due to “a number of operational and financial challenges.”
Per the letter, despite SafeMoon’s efforts, the protocol could not access its bank accounts before filing the voluntary Chapter 11 petition, compounding its earlier regulatory challenges.
Besides filing for Chapter 7 bankruptcy, SafeMoon has terminated its employees and urged them to wait for further directions from the bankruptcy trustee.
“You will need to file a claim in the bankruptcy case for your unpaid wages. It is important that you review any documents you receive regarding SafeMoon’s bankruptcy case and that you follow the instructions in those documents to timely file your claim,” the letter read.
SafeMoon’s growing challenges had a seismic impact that extended to the markets, and the protocol’s token (SFM) fell drastically.
SFM Falls 31%
According to CoinGecko data, SFM fell 31% five hours after SafeMoon’s bankruptcy filing hit the headlines.
While SFM regained slightly from $0.000065 to $0.000061 in a lightning-quick 10-minute span, the token had lost over 40% at press time. Besides being down 98.2% from its January 2022 peak price of $0.0033, the token’s market cap fell to $34.5 million from its once $1 billion.