Cryptocurrency is still one of the hottest commodities on the modern digital market, despite no one really knowing what it is or how it works. It’s also highly susceptible to theft and scams — as a slew of celebrities including Lil Yachty and Soulja Boy are finding out via a class-action lawsuit against them, according to Complex and ClassAction.org. The two Atlanta rappers, along with YouTubers Jake Paul and Ben Phillips, as well as former Backstreet Boy Nick Carter, are all named as promoters of SafeMoon, a cryptocurrency founded by Braden John Karony, in exchange for tokens.
According to the suit, the SafeMoon currency ultimately amounted to a pump and dump scheme, which is when scammers hype up an effectively worthless commodity to artificially raise its price, then pull out of the commodity before it crashes. The movie Boiler Room explains it pretty well. This is more or less what happened with SafeMoon, which was created in March 2021 and had completely crashed by December, hitting a low of $0.0000006521 per token on New Year’s Eve. “As of the filing of this Complaint,” the lawsuit reads, “the trading volume for the SafeMoon Token has plummeted to around only $60,000.” The height of volume, $191.6 million on April 22. The key to SafeMoon’s “slow rug pull” was “token burns,” removing a certain number of tokens from circulation.
As tokens were “burnt,” more investors bought in, inflating the price of the remaining tokens. As the value began to drop, another “burn” was employed to bump the value again. Eventually, as trading volume fell, chief technology officer Hank Wyatt resigned, selling off his tokens to investors ahead of the failed launch of SafeMoon’s digital wallet. According to the suit, Wyatt would have or should have known that the wallet would not be ready. A day later SafeMoon COO Jack Haines-Davies also resigned, which dropped the price of the tokens from $0.000000153 to $0.00000119.