Decentralized finance protocol SafeMoon has taken the drastic step of filing for Chapter 7 bankruptcy protection in response to mounting allegations of fraud and mismanagement. The company’s founders, Kyle Nagy, Thomas Smith, and Braden Karony, are currently facing a $200 million lawsuit from the U.S. Securities and Exchange Commission (SEC) for securities fraud.

The SEC lawsuit, filed in November 2023, accuses the SafeMoon founders of orchestrating a massive securities fraud scheme by raising over $200 million through unregistered securities offerings and misappropriating substantial sums for personal use.

The bankruptcy filing is the latest development in a tumultuous period for SafeMoon, marked by accusations of a carefully orchestrated scheme of deception and manipulation that contributed to the protocol’s rapid rise.

Chief Restructuring Officer Kenneth Ehrler communicated the bankruptcy filing to SafeMoon employees, simultaneously terminating all employment contracts with immediate effect. Employees were instructed to file claims for unpaid wages and benefits with the bankruptcy court.

Following the bankruptcy news, the native crypto token Safemoon experienced a drop from $0.000065 to $0.000045 over a five-hour period. However, the cryptocurrency’s price recovered shortly after, currently trading at $0.000059, representing a 9% decline in the last 24 hours, according to Coingecko data at the time of writing.