In a letter to U.S. District Judge Eric Komitee, Karony’s attorney highlighted a new DOJ directive that disbands its digital assets enforcement unit and restricts the department’s control over crypto-related issues as the basis for their argument.
The policy memo, issued on April 7 by Deputy Attorney General Todd Blanche, explicitly states that the DOJ “is not a digital assets regulator” and will no longer pursue litigation that imposes regulatory frameworks on digital assets.
The DOJ memo also instructs prosecutors to refrain from bringing securities or commodities violations if proving such would require defining a crypto asset as a security or commodity—unless there’s a compelling legal interest in doing so. Smith emphasized in the letter’s footnote that Karony holds no such interest.
This latest move is part of Karony’s ongoing efforts to have the case against him dismissed. In February, he sought to delay his trial, initially scheduled for March 31, arguing that then-presidential candidate Donald Trump’s proposed crypto policies could influence legal interpretations relevant to his case.
Safemoon creator was charged for fraud
Karony, SafeMoon creator Kyle Nagy, and former CTO Thomas Smith were charged in November 2023 with wire fraud, securities violations, and money laundering. Prosecutors allege the trio misappropriated $200 million in investor funds. Smith has since pleaded guilty, admitting his role in the scheme, while Nagy remains at large, reportedly in Russia.
SafeMoon, once a prominent name in the crypto space, filed for bankruptcy in December 2023, just weeks after being hit with simultaneous lawsuits from the SEC and DOJ. Earlier that year, the firm also suffered a major security breach, though the hacker later agreed to return 80% of the stolen funds. Karony’s legal team now hopes the DOJ’s internal policy changes will tip the scales in his favour as he seeks to quash the government’s case.
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The case went to trial despite the policy change, and the former CEO was sentenced
The case proceeded to a three-week federal trial in May 2025. A jury ultimately found Karony guilty of conspiracy to commit securities fraud, wire fraud and money laundering.
The former SafeMoon CEO was sentenced to 100 months in prison and ordered to forfeit approximately $7.5 million. Two residential properties were also subject to forfeiture, while the amount of restitution owed to victims was left to be determined later.
The DOJ said Karony had exploited access to SafeMoon’s liquidity pool and diverted millions of dollars in cryptocurrency, using the proceeds to finance luxury purchases and real estate.
That verdict effectively undercut the argument that the DOJ’s changing approach to crypto enforcement should prevent the government from prosecuting the case.
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