This Memecoin Founder Faces Prison for Legal Fee Default: What’s the Situation?

SafeMoon (SFM) CEO John Karony stands to lose his legal counsel after they accused him of non-payment of legal fees. Lawyers from Petrillo Klein & Boxer LLP submitted a filing to the court yesterday to request a withdrawal from Karony’s case.

SafeMoon CEO John Karony’s lawyers say that the crypto boss failed to honor his financial obligations amid their defense of his fraud charges.

Lawyers Seek Counsel for SafeMoon CEO

According to the lawyers’ filing on February 12, 2024, SafeMoon couldn’t compensate for Karony’s shortfall by paying the firm’s retainer fee. As a result, the lawyers requested the judge to allow them to withdraw representation. They affirm a discussion with Karony over transferring the case to public defender Nicholas Smith.

Read more: What Is Safemoon — A Beginner’s Guide and Price Forecast

Despite reservations that failure to pay legal fees is not grounds enough for a withdrawal, the judge said he would consider their motions. The law firm is helping Karony and his colleagues fight charges of securities, wire fraud, and money laundering conspiracy. They originally filed a request to withdraw in January.

Karony and SafeMoon’s chief technology officer, Thomas Smith, were arrested on Oct. 31, 2023, for fraud and money laundering conspiracy. Karony is out on a $3 million bond granted on Feb. 9, 2023, and resides at his parents’ home in Utah.

safemoon price CEO — SafeMoon (SFM) Price Chart | Source: BeInCrypto

Founded in 2021, SafeMoon is a memecoin project that encourages long-term investing. It penalizes sellers with a fee, a portion of which goes to holders.

Lawyers Reap Millions From Crypto Cases

Karony’s case highlights a plight shared by the crypto industry since the collapse of Terra Luna. Since mid-2022, crypto companies and former bosses have had to pay lawyers millions for criminal and civil proceedings.

Last year, former FTX CEO Sam Bankman-Fried paid defense lawyers the $10 million he gifted his father. Bankman-Fried relied on his parents, one Stanford official, and another former Stanford employee for his $250 million bond. His one-time rival, Changpeng Zhao, agreed to a $175 million bond and pledged $15 million from a trust while relying on two guarantors to commit $250,000 and $100,000, respectively.

Legal fees for crypto civil cases have also been a community talking point. In the bankruptcy case of cryptocurrency lending platform Celsius, small investors went toe-to-toe with heavyweight law firms like Kirkland Ellis LLP for a share of the firm’s assets.

In the case of Celsius, the court gave retail customers priority. Similarly, most customers of bankrupt lender Voyager Digital were prioritized over lawyers.

In contrast, the bankruptcy of the FTX crypto exchange prioritized legal fees over customers. In March 2023, legal firms, including Sullivan & Cromwell, billed FTX over $38 million.

Read more: FTX Collapse Explained: How Sam Bankman-Fried’s Empire Fell

Katherine Stadler, a fee examiner appointed by the judge, said in June that FTX legal fees were “expensive by any measure.” But she added the fees matched the task the lawyers had.

“Very few firms could have accomplished what these professionals accomplished in 90 days…transforming a smoldering heap of wreckage into a functioning Chapter 11 debtor-in-possession,” Stadler reported.

BeInCrypto contacted Karony for a comment, but he did not reply at press time.