The United States Securities and Exchanges Commission (SEC) has been making a lot of noise in the crypto space amid its legal battles with top crypto firms. Among them is SafeMoon, which was recently charged with regulatory violations and fraud. However, SafeMoon responded and addressed the recent exploits.
This isn’t the only battle the SEC has picked with a decentralized exchange. This year has been a rollercoaster of events and allegations filed by the regulatory authority, and among the tagged companies include Binance, Coinbase, and PayPal. SafeMoon has recently been caught up in the same web.
SafeMoon addressing recent exploits and the SEC charges
SafeMoon, a decentralized finance project, was recently charged for regulatory framework violations and fraud by the US Securities and Exchange Commission (SEC). The firm, however, recently addressed this exploration and mentioned their intended efforts of closely examining the recent developments.
The firm stated its compliance in examining the matter and initiating prompt solutions. The decentralized project was quoted in its recent post:
We are reviewing the recent news, and we, of course, take these issues extremely seriously. As we receive more information, we will do our best to address the situation as quickly as possible.SafeMoon
SafeMoon addressed this matter through a social post on X (formerly Twitter), where the team elaborated on active developments in its commitment to serving its users. SafeMoon stated amid its legal battle:
In the meantime, our teams continue to build, and we keep our focus on delivering for our users, building our vision, and moving forward on our mission.SafeMoon
The exploitation began in March and resulted in a net loss record of $8.9 million in BNB. More information revealed the capital linked to the security breach has been distributed using centralized exchanges. As such, according to Match Systems, a blockchain analysis firm, these transactions hold solid grounds for relevance to law enforcement authorities.
SafeMoon’s exploitation by hackers
Based on the Match System’s analysis, an attacker took advantage of SafeMoon’s smart contract vulnerability that was related to the “Bridge Burn” feature. This enabled the execution function of burning SafeMoon (SFM) Tokens in any user address. As a result, exploiters made away with 32 billion SFM tokens.
The exploiters transferred the tokens from SafeMoon’s liquidity pool address to its deployed address. This affected SFM’s market value, which saw an increase. Additionally, this prompted the exploiters to leverage the situation and exchange some of the tokens for BNB. This totaled a transfer of 27,380 BNB to the hacker’s address.
According to Match Systems analysis, the smart contract vulnerability was absent in the project’s previous version but was present after the new update in late March 2023. This coincided with the day the exploit happened. As such, it raised suspicion that potential insider trading activities were involved.
The hackers stated they unintentionally exploited the platform’s protocol, and the whole incident was accidental. They also stated their intentions of getting into negotiations and establishing a means to reach the platform’s communication team in trying to return 80% of the funds.
Following all these developments, the US SEC went on and charged the SafeMoon crypto company and its executive team under allegations of fraud and offering unregistered digital assets as crypto securities.
According to the Chief of the SEC Enforcement Division’s Crypto Assets and Crber Unit (CACU), David Hirsch:
Decentralized finance claims to deliver transparency and predictable outcomes, but unregistered offerings lack the disclosures and accountability that the law demands, and they attract scammers like Kyle Nagy, who use these vulnerabilities to enrich themselves at the expense of others.David Hirsch