Despite a memorandum signaling the DOJ under Trump Administration will scale back certain enforcement actions involving cryptocurrency and digital assets, federal prosecutors in the Eastern District of New York recently reaffirmed the DOJ’s intent to pursue criminal fraud charges against Braden John Karony, the former CEO of the cryptocurrency and blockchain company SafeMoon.

The Charges Against SafeMoon’s Former CEO

Back in 2023, the DOJ announced the unsealing of a federal indictment alleging fraud and money laundering related charges against Karony and co-defendants in connection with SafeMoon digital assets.  SafeMoon was a decentralized digital finance and crypto firm that issued SafeMoon tokens (SFM) on a blockchain.  According to the DOJ, the defendants allegedly misled SFM investors about (1) “whether SFM’s use of ‘locked’ liquidity was inaccessible to the defendants” thus preventing a “rug pull” (referring to a situation where an issuer promises a benefit and receives investor funds but fails to deliver and retains the funds); and (2) the defendants’ “personal holding and trading of SFM.”  After SFM’s market capitalization soared to over $8 billion, defendants allegedly “diverted and misappropriated millions of dollars’ worth of purportedly ‘locked’ SFM liquidity for their personal benefit,” including allegedly buying sports cars and real estate.

The DOJ Memo Scaling Back Certain Cryptocurrency Enforcement Actions

As the DOJ’s criminal case against Karony proceeded towards trial, on April 7, DOJ Deputy Attorney General Todd Blanche issued a memorandum concerning the DOJ’s enforcement priorities related to cryptocurrency and digital asset firms.  The memo directed the DOJ to “no longer pursue litigation or enforcement actions that have the effect of superimposing regulatory frameworks on digital assets,” and instead to “focus on prosecuting individuals who victimize digital asset investors, or those who use digital assets in furtherance of criminal offense ….”

The memo further identifies certain factors federal prosecutors must consider when deciding whether to bring criminal charges relating to digital assets. The factors include, among others, (1) prioritizing cases that involve harm to investors and consumers, or that involve the use of digital assets in furtherance of a crime; (2) not charging violations of securities or commodities laws where the charge would require the DOJ to litigate whether a digital asset is a “security” or a “commodity” under the law and where another criminal charge (e.g., wire fraud) is available; while (3) permitting the filing of securities fraud charges where the “security” at issue is equity or stock in a digital asset company.

The DOJ’s Decision to Proceed to Trial

Two days after the DOJ Deputy Attorney General issued that memo, Karony raised it to the judge presiding over his case.  Karony argued that the memo was supplemental authority supporting his then-pending motion to dismiss the indictment.

Shortly thereafter, the DOJ prosecutors informed the judge that they had completed an “internal review of th[e] case in light of the April 7, 2025 Memorandum,” and “confirm[ed] that it will proceed to trial on all counts.”

That same day, the judge denied Karony’s motion to dismiss and put the case on track for a trial beginning in early May.  Notably, the judge’s order denying the motion to dismiss left to the jury at trial the question of whether the SFM token qualifies as a security: “SFM’s status as a security (or not) should be left to the jury, or resolved by the Court pursuant to a motion under Rule 29 [for judgment of acquittal] or Rule 33 [for a new trial] ….  The parties’ ‘spirited debate’ as to the proper categorization of SFM therefore comes too soon.”

Key Takeaways

This is not the final word in the government’s case against Karony in connection with SafeMoon and the SFM tokens, and the upcoming trial should offer valuable insights into how the government will prosecute criminal actions against crypto companies and their executives.  But the DOJ’s decision to proceed to trial despite the DOJ Deputy Attorney General’s memo is notable on its own.

Many have taken the memo, along with the SEC’s decisions to drop civil enforcement actions against Coinbase and against Kraken, as signaling a shift in the government’s enforcement priorities away from cryptocurrency and digital asset firms.  Yet it is not a blanket “get out of jail free” card for all charges related to cryptocurrencies and digital assets.

Constantine Cannon partner Dan Vitelli commented: “Along with analyzing the broader public statements about enforcement priorities, tracking particular government enforcement actions involving cryptocurrency or digital assets provides additional gloss on how the government is implementing its policy.  What is clear is that the government continues to bring enforcement actions to go after those who victimize investors, including investors in crypto or digital asset companies.”

Stay tuned for more developments on this story.

The SEC’s Whistleblower Program

The Securities and Exchange Commission (SEC) enforces federal securities laws and works to protect against securities fraud. Whistleblowers can be eligible for rewards under the SEC Whistleblower Program, which can reward individuals with up to 30% of government recovery stemming from information the whistleblower provides. The program has been greatly successful since its start in 2012 under the Dodd-Frank Act.  It has led to billions of dollars in SEC recoveries, and the SEC has awarded more than $2.2 billion to 444 individual whistleblowers under the program.

Our Firm Helps SEC Whistleblowers

Whether you have information on securities fraud, wire fraud, or other types of misconduct, our firm can help. If you believe you have information about fraud, please contact our team to discuss your options as a potential whistleblower.

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