Image: Omar Marques/SOPA Images/LightRocket via Getty Images
Last year, a cryptocurrency called SafeMoon went viral on social media. You might have seen it endorsed by several celebrities and influencers like rapper Lil Yachty, YouTuber KEEMSTAR, and boxer Jake Paul. Its flashy promotion, the promise of “safe” riches for investors using complex mechanics, and its sub-cent value all became emblematic of the then-emerging world of decentralized finance, or DeFi.
Since then, SafeMoon has been on a rollercoaster: key employees have left, two different groups of investors have launched class actions lawsuits against the company and its celebrity promoters accusing it of “pump and dump” fraud, the price of the token has gone down around 85 percent in just a few months, turning off some of the early celebrity investors who pumped it, such as Barstool Sports founder Dave Portnoy, who called it his “worst purchase.” Also, Coffeezilla, a prominent independent researcher who investigates crypto scams has accused the people left in the company of misappropriating millions of dollars, which has spurred many investors to double down in their defense of SafeMoon. Coffeezilla’s videos on SafeMoon have been viewed 2 million times.
Regardless of the company’s ultimate fate, SafeMoon’s story is one of a rising star becoming a cautionary tale for people interested in investing in cryptocurrencies and more complex DeFi products.
Molly White, a well-known crypto critic who runs the popular Twitter account and website called “web3 is going just great,” agreed.
“I’m really looking forward to watching how the litigation goes, because it could be a strong signal to influencers who have been engaging in pump-and-dump schemes without any apparent fear of repercussions,” White said in an online chat.
SafeMoon, as well as its CEO and other employees, did not respond to multiple requests for comment for this article, but Motherboard spoke to SafeMoon’s CEO John Karony for an episode of CRYPTOLAND in November.
SafeMoon’s story began last year, when the cryptocurrency launched and almost immediately gathered a lot of attention thanks to its unusual scheme: every time someone sells the SafeMoon token, 5 percent of the proceedings go back to current holders, and another 5 percent is destroyed. This system is designed, in theory, to reduce the supply of the token and drive up its price, encouraging investors to hold SafeMoon instead of speculating and day trading it. As its name implies, it was supposed to be a “safe” way to reach the moon—crypto-speak for when a token’s value skyrockets.
So far, this wouldn’t make SafeMoon particularly special. Other cryptocurrencies in DeFi adopt similar schemes, and SafeMoon’s could even be said to be on the simpler side. What can better explain SafeMoon’s rise is how many influencers bought in and openly endorsed the project, encouraging others to join in.
“CHECK YOUR #SAFEMOON RIGHT NOW! The price is going through the damn roof! bro we’re rich!” KEEMSTAR tweeted to his more than two million followers in April of last year.
“I told y’all safe moon was goin up lol,” tweeted Lil Yachty, who has more than five million followers.
But Safemoon hasn’t reached the moon, despite having high-profile boosters. Instead, it has fallen down to Earth. SafeMoon’s price reached an all-time high of $0.003145 in early January, according to CoinMarketCap, and has been crashing ever since. Its price is currently $0.0004731. Amid the seemingly unstoppable decline, the company became very keen on marketing itself as much more than just a crypto token.
“While memecoins might have a different purpose, SafeMoon isn’t a memecoin. We have a real mission behind us for a tech company. And again, our plan is to bring the future to now,” SafeMoon’s Karony told Motherboard in November.
As the token’s value continued to crash, Karony unveiled a nebulous project called Operation Pheonix—a misspelling of “phoenix” that Karony pronounces as “phay-nix”—that SafeMoon investors are currently hoping will turn the project around. It’s supposed to bring wind turbines to single households, including in Africa, as part of “a combination of multiple innovations combined into a single SafeMoon ecosystem.”
Operation Pheonix isn’t a “single project,” Karony says in a reveal video from last year. Here is how he describes it: “It is the application and integration of innovative technologies to increase greater efficiency through the proper and correct use of decentralization into macro IOT infrastructure.”
SafeMoon showcased the wind turbines in the Operation Pheonix reveal video. But the turbines are actually made by a clean energy startup called Semtive, as Coffeezilla pointed out in his SafeMoon video.
A Semtive spokesperson told Motherboard that SafeMoon has purchased several wind turbines. The spokesperson said that Semtive allows customers to add their brand to the turbines, as long as they also include the Semtive brand.
In the Operation Pheonix reveal video, Karony reads from a teleprompter to describe SafeMoon as working on “surface manipulation of the foils on smaller turbines through the use of hydrophilic and hydrophobic particles.” Karony claims this will make wind turbines more efficient. In practice, it looks like Semtive’s wind turbine covered in tiny black dots.
What, exactly, the plan is for these wind turbines and how they will make money for the company and users is somewhat unclear. In a video posted in January, Karony described integrating them with a planned metaverse game. “So, you have the wind turbine in real life, turning and burning, doing its thing, and then in the game you have a resource generator that you’ve installed on your little plot of land, and it’s generating resources based on the energy produced in the real world,” Karony said. A long Reddit post speculating on what this might ultimately look like was later published by SafeMoon as a community update.
As part of Project Pheonix, SafeMoon also began looking at Africa, specifically The Gambia, in a familiar crypto pitch of serving the “unbanked.” SafeMoon claimed to be working with local governments to adopt the token as a local currency. To date, that project has not resulted in anything concrete.
Do you have information about SafeMoon or other similar crypto companies? We’d love to hear from you. You can contact Lorenzo Franceschi-Bicchierai securely on Signal at +1 917 257 1382, Wickr/Telegram/Wire @lorenzofb, or email firstname.lastname@example.org
In a recent Captain’s Log message to the SafeMoon community, Karony said that work in Africa remains “one of our highest priorities on our impact agenda,” but said that a recent trip to The Gambia mainly reminded him of opportunities elsewhere, including in the U.S.
“We continue to pursue our Gambia endeavors directly, through our own networks,” the blog states. “This presents the most efficient and effective way to make a maximum impact for the people and the quality of life in that region. While The Gambia will always hold a high place in my heart and priorities, the recent trip illuminated myriad other opportunities in other parts of Africa and the world, including the United States.”
SafeMoon is also promising to develop and release its own cryptocurrency exchange—SafeMoon is only available via decentralized exchanges with names like PancakeSwap and smaller exchanges like BitMart (compared to leaders Binance and Coinbase)—but that has not yet materialized. The company did release its own crypto wallet, but it looks like a copy of the Trust Wallet, according to Blamebootsy, another independent blockchain investigator who helped Coffeezilla in his SafeMoon investigation.
Trust Wallet did not respond to a request for comment.
SafeMoon’s appeal allowed the company to attract not only investors, but also people willing to help the project grow. And despite the price crash and as-yet unfulfilled promises, the project still has many true believers who are willing to defend it and who are holding on to their tokens in the hopes that Project Pheonix can turn things around.
Not everyone has maintained such a rosy disposition, however. Indeed, lawsuits aimed at Safemoon, its executives including Karony, and celebrity promoters accuse them of making “misleading promotions and celebrity endorsements” that artificially inflated the token’s price, “causing investors to purchase these losing investments at inflated prices.” The lawsuit notes that the SafeMoon website advised investors to “HODL!” but alleges that executives and promoters sold tokens under their control.
“This case arises from a scheme among various unscrupulous individuals in the cryptocurrency sector to misleadingly promote and sell the digital asset associated with SafeMoon (the SAFEMOON Tokens) to unsuspecting investors,” one of the lawsuits read.
A person involved in the project, who goes by The Ginger, became a moderator for SafeMoon’s official Discord in March of 2021 and became involved in livestreams with company employees, according to one of the class action lawsuit’s complaints. (The Ginger asked to remain pseudonymous to protect his privacy and avoid retaliation.)
“I drank all of the Kool-Aid,” The Ginger told Motherboard. “We built a HUGE cult-like following.”
The Ginger said that the “primary reason” for SafeMoon’s early success and going viral was due to several Reddit Ask Me Anything sessions that people involved in the company hosted almost weekly.
“They started with some really rudimentary stuff, but holders would tune in and see vape pens and hoodies, laid back, hyped, and happy people who seemed to genuinely enjoy each other and what they were doing,” he said. “They were ‘cool’ and didn’t seem to be out to ‘sell’ to anyone. Just engage people along the way.”
But now that accusations against SafeMoon have been publicly aired in the Coffeezilla video, The Ginger said that “the project currently has no accountability, oversight, or real experience in the space.” He believes the accusations made by Coffeezilla, he said.
The Ginger left the project in May of 2021, when he joined a different crypto project—called Piggy Tokens—created by several former SafeMoon employees. Months later he left that project too, accusing the creators of defrauding investors and himself, according to court documents.
“What we know of SafeMoon mostly is that there’s a lot of questions that need to be answered. And a lot of information that needs to be vetted by a third party, because there seems to be misappropriation of funds,” Blamebootsy told Motherboard in an online chat. “Do I want to call that theft? No, because I’m not a judge. And that’s not my place to call up theft. Do I think that there’s a lot of money that needs to be accounted for and that someone needs to just plainly say where it is and plainly say what will happen to it? Yeah, I think that’s a fair thing to want.”
Amid the storm, SafeMoon is sailing along led by its captain, Karony.
“It’s going to probably come down to this one thing, which is trust. You know, you need to be able to build trust in a trustless industry,” Karony told Motherboard last year.
Subscribe to our cybersecurity podcast, CYBER.