Prepping for Fraud Payback Hearings Helps Clients Save Millions

Former SafeMoon LLC CEO Braden Karony will appear in Brooklyn federal court April 23 for his restitution hearing three months after receiving a 100-month sentence for misappropriating more than $200 million from approximately 90,000 investors in his digital asset company.

His defense attorney almost certainly spent months preparing for the February sentencing hearing. Yet restitution hearings typically receive a fraction of the preparation invested in sentencing.

Karony, who is appealing his May 2025 conviction on crypto fraud charges, will face a proceeding at the US District Court for the Eastern District of New York that will determine his financial obligations until death, obligations he can’t discharge through bankruptcy.

What’s at Stake

Federal restitution hearings operate under different rules than sentencing. The government bears the burden of proof by preponderance of evidence, not beyond reasonable doubt. The Mandatory Victims Restitution Act, or MVRA, gives judges latitude in evaluating causation, victim identification, and loss calculations.

The SafeMoon case exemplifies the complexity most restitution hearings present. The government must establish which of estimated 90,000 investors qualify as “victims” under 18 U.S.C. Section 3663A, what losses are directly attributable to Karony’s conduct versus market forces, and how to trace funds through cryptocurrency wallets and exchanges.

These questions require expert testimony and sophisticated legal argument. Yet most defense attorneys approach restitution hearings as ministerial proceedings rather than adversarial contests.

Missed Opportunities

Unlike sentencing, where guidelines constrain judicial discretion, MVRA restitution determinations involve fact-finding where defendants can present evidence, cross-examine government witnesses, and challenge prosecution methodology. The burden of proof matters. The government must prove losses by preponderance, but defendants who present no contrary evidence concede the government’s calculations by default.

In SafeMoon, Karony’s defense could challenge victim identification; not every investor who lost money necessarily qualifies as a victim under MVRA. Some may have sold at profit before the collapse. Others may have losses attributable to market conditions rather than fraud.

The defense could contest temporal scope. MVRA covers losses “directly and approximately caused” by the offense. In a crypto fraud case that spanned years, certain losses may have occurred before Karony’s involvement or after he departed.

The defense could argue mitigation of loss. If victims recovered funds through civil litigation or asset forfeiture, the defense could argue against double recovery.

Judges consider these arguments only when defendants present them. Silence equals acceptance.

Evidence Reducing Restitution

From my experience in more than 450 federal cases, defendants who present systematic evidence at restitution hearings achieve substantially lower obligations than those who appear unprepared.

Expert analysis matters. In complex financial fraud cases, forensic accountants can demonstrate flaws in the government’s loss methodology. For SafeMoon, a cryptocurrency expert could testify about market volatility, technical factors affecting token value, and alternative causation theories.

Documented victim payments demonstrate good faith. Defendants who voluntarily paid restitution before the hearing receive credit when judges structure payment schedules.

Third-party liability evidence can reduce exposure. In conspiracy cases, defendants can present evidence that co-conspirators caused specific victim losses. This doesn’t eliminate joint-and-several liability under MVRA but affects the judge’s allocation decisions.

Temporal limitation evidence narrows exposure. Precise records demonstrating when the defendant’s involvement began and ended can exclude losses outside that timeframe.

Most defense attorneys present none of this. They appear, offer minimal argument, and accept whatever the judge orders. The result: Restitution obligations that could have been reduced 30% to 50% with adequate preparation.

Post-Hearing Reality

MVRA restitution persists until death. The government can garnish wages, seize assets, and intercept tax refunds for decades.

The payment schedule negotiated at the restitution hearing determines the defendant’s financial reality through incarceration, supervised release, and beyond.

For Karony, the schedule will affect Bureau of Prisons Financial Responsibility Program participation. Inmates who make consistent restitution payments become eligible for halfway house placement under 18 U.S.C. Section 3624(c). Those who don’t face extended custody.

It affects supervised release conditions; judges impose restitution payment as supervised release conditions. Failure to pay can result in violations and return to custody.

It also affects early release eligibility. Federal programs such as compassionate release consider defendants’ efforts toward restitution obligations. Documented payments support these applications.

Defense attorneys who negotiate favorable payment schedules—based on realistic ability to pay, structured around incarceration and post-release employment—provide value compounding over decades. Those who accept whatever schedule the government proposes leave clients in positions that generate violations, restrict employment, and foreclose early release.

Defense Beyond Sentencing

Too many defense attorneys treat sentencing as the conclusion of representation when it’s the midpoint. Competent federal defense requires the same systematic rigor for restitution hearings that attorneys invest in sentencing.

The restitution hearing provides a concrete example of what comprehensive representation requires versus what most defendants receive. The gap between the two is measured in millions of dollars of unnecessary restitution and decades of financial devastation.

Clients who receive comprehensive representation through restitution achieve dramatically better outcomes than those abandoned after sentencing. The SafeMoon restitution hearing will demonstrate whether Karony’s defense counsel understood this or whether they viewed sentencing as their final obligation.

The case is USA v. Karony, E.D.N.Y., No. 1:23-cr-00433, hearing scheduled 4/23/26.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Joseph De Gregorio is the founder and president of the Sentencing Advocacy Group, a federal sentencing reduction and early release consultancy.

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