Kim Kardashian has one of the largest social media followings in the world, so her posts carry weight. Her statements related to EthereumMax, a digital token, have resulted in a lawsuit. The lawsuit alleges that Kardashian’s statements about EthereumMax (EMAX) were “false and misleading” and led investors into a “pump and dump” scheme.
Brooklyn, New York resident Ryan Huegerich and other plaintiffs filed the lawsuit. They claim that Kim Kardashian, Floyd Mayweather, and another celebrity scammed them into buying EMAX tokens.
What did Kardashian Do?
In June 2021, Kardashian posted a message on her Instagram that read “Are you guys into crypto?” with the disclaimer language “this is not financial advice.” Kardashian’s post mentioned she was sharing what her friends told her about the EthereumMax token. She included the “AD” (paid advertisement) hashtag.
At the time of her EMAX token post, Kardashian had over 250 million Instagram followers. Kardashian typically earns anywhere from $500,000 to $1 million per sponsored Instagram post. Although the precise amount she received to promote EthereumMax is unknown, estimates are that she received an amount in this range.
The other celebrities subject of the EthereumMax lawsuit include former professional boxer Floyd Mayweather Jr. and former professional basketball player Paul Pierce.
In 2021, Mayweather touted the benefits of investing in EthereumMax while chatting with a YouTube celebrity at a boxing match. In May 2021, Pierce promoted EthereumMax on his Twitter account. The post, which also referred to a conflict between Pierce and ESPN, stated: “@espn I don’t need you. I got @ethereum-max I made more money with this crypto in the past month then I did with y’all in a year.” As former NBA player, Pierce worked as a sports commentator and the tweet attracted widespread attention.
EthereumMax Value Nosedives After Soaring Following Kardashian Promotion
Since early June, EthereumMax has lost around 97% of its value. The plaintiffs have accused Kardashian and the other celebrities of artificially inflating the cryptocurrency’s price through social media. After the celebrity promotions, EthereumMax increased in value by more than 1,300%. The effects didn’t last long. The coin’s price plummeted to an all-time low just a month after the price spike. The plaintiffs claim that Kardashian and others offloaded their holdings before the massive price drop and earned significant profits.
Despite the name similarities, EthereumMax is not related to Ethereum, the second-largest cryptocurrency after bitcoin. The lawsuit also claims that branding the crypto with “Ethereum” as part of its name intentionally deceived investors.
The plaintiffs filed their class action suit in the U.S. District Court for the Central District of California. The plaintiffs seek restitution and disgorgement of profits by the defendants, who include Kim Kardashian, Floyd Mayweather, and Paul Pierce. The defendents also include the EthereumMax project co-founders.
Who is EthereumMax, Anyway?
Not much is known about the founding team behind the EthereumMax project. The court documents identify Steve Gentile as co-founder and creator of EthereumMax. The plaintiffs claim that the EMAX token is a “speculative digital token created by a mysterious group of cryptocurrency developers.”
A spokesperson for the EthereumMax project pushed back on the Kardashian lawsuit’s characterization of the project as a scam. “This project has prided itself on being one of the most transparent and communicative projects in the cryptocurrency space. We dispute the allegations and look forward to the truth coming out.”
Warnings from Both U.K. and U.S. Commissions
A few months after Kardashian’s social media post, Charles Randell of the U.K.’s Financial Conduct Authority delivered a speech and warned people to be careful of crypto ads on social media platforms. He specifically singled out Kardashian’s promotion of EthereumMax. He said that “social media influencers are routinely paid by scammers to help them pump and dump new tokens on the back of pure speculation.”
This isn’t the first time Mayweather has run into legal issues over cryptocurrency promotions. In 2018, he paid the U.S. Securities and Exchange Commission SEC over $600,000 to settle claims that he unlawfully promoted an initial coin offering on social media. The SEC also charged DJ Khaled for his promotional activities concerning the initial coin offering. He reached a separate settlement with the SEC, paying over $150,000.
Steven Peikin, a former Co-Director of the SEC’s Division of Enforcement, highlighted the importance of caution to investors with respect to advertisements by celebrity. “Investors should be skeptical of investment advice posted to social media platforms, and should not make decisions based on celebrity endorsements,” Peikin stated. “Social media influencers are often paid promoters, not investment professionals, and the securities they’re touting, regardless of whether they are issued using traditional certificates or on the blockchain, could be frauds.”