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Former SafeMoon CTO Admits to Fraud, Exposes Insider Schemes

Former SafeMoon CTO Admits to Fraud, Exposes Insider Schemes

CryptotimesCryptotimes2025/05/14 02:12
By:Iyiola AdrianJahnu Jagtap

Thomas “Papa” Smith, the former CTO of SafeMoon, testified this week in a New York courtroom about how the DeFi project was built to allow insiders to quietly take investor money. Smith, who has already pleaded guilty, testified in the trial of John Karony, former CEO of SafeMoon, who faces charges alongside SafeMoon creator Kyle Nagy. 

According to the Protos report , the three are accused of wire fraud, securities fraud, and money laundering. The case centers around actions taken during SafeMoon’s short-lived success in 2021. Smith admitted that SafeMoon’s code allowed the core team to pull millions from liquidity pools, even though they told investors the pools were locked. 

“As soon as I start asking you to trust me, you shouldn’t,” Smith told the court, summarizing what he now sees as a built-in deception. The liquidity pools were meant to keep the system stable, but Smith revealed they were secretly accessed for personal gain.

Prosecutors showed video clips from 2021 where Karony, Smith, and paid influencer Ben Phillips told viewers that money from exchange transactions would return to the PancakeSwap liquidity pool. Smith said that never happened.

Instead, the funds from BitMart, a crypto exchange, were paid out in USDT, a stablecoin not compatible with SafeMoon’s pools. This means the money was never actually recaptured.

Smith also revealed that Kyle Nagy sent him $500,000 worth of SafeMoon tokens, which he believed came straight from the liquidity pool. “Previously to all of that, I had a very strong moral compass,” he said. He further added, “After I had the money, I stopped asking questions. I became that monster I was talking about.”

The court also heard about a hidden tool called “exclude from tax,” which let insiders skip the 10% transaction fee that regular users always paid. That fee was a major part of SafeMoon’s pitch. Smith claimed the feature was only available to whoever controlled the main wallet.

Karony’s defense argued that he had warned the LP could be tapped for emergencies. Smith pushed back, saying it “was used for things that were not emergencies.”

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