Kim Kardashian and Floyd Mayweather are sued over ‘crypto pump and dump scam’: New York resident files lawsuit claiming he ‘suffered losses’ investing in EMAX tokens promoted by stars that plunged 98% in value
- Lawsuit filed against EMAX and celebs in Los Angeles federal court on January 7
- It claims they touted crypto tokens to boost prices and make themselves profit
- The complaint is proposed as a class-action lawsuit, meaning others can join
Kim Kardashian and Floyd Mayweather Jr are being sued for allegedly misleading investors by promoting cryptocurrency tokens as part of a ‘pump and dump scam’.
A lawsuit, filed in the Los Angeles federal court on January 7, claims the reality star and boxing champion – among others – touted tokens sold by EthereumMax, or EMAX, in order to boost its price and make themselves a profit ‘at the expense of their followers and investors.’
Figures show the value of the cryptocurrency plummeted by a whopping 98 per cent in July – just weeks after the stars had advertised it to their hundreds of millions of combined followers.
An advert posted by Kim in June reached one in five people in the US alone, and three in 10 crypto owners, according to data intelligence company Morning Consult.
The suit was filed by a New York resident who bought EMAX tokens and lost money – and is proposed as a class-action lawsuit, open to anyone who allegedly lost out after purchasing the tokens from mid-May to late June 2021.
The complaint claims: ‘The company’s executives, collaborating with several celebrity promoters … made false or misleading statements about EthereumMax through social media advertisements and other promotional activities.’
A lawsuit, filed in the Los Angeles federal court on January 7, claims Kim Kardashian, (pictured) and others, touted tokens sold by EthereumMax, or EMAX, in order to boost its price and make themselves a profit ‘at the expense of their followers and investors’
According to the document, Kardashian promoted EthereumMax in a June 2021 post on Instagram (pictured), when she had some 250 million followers. ‘Are you guys into crypto?’ she wrote in the post, followed by the disclaimer ‘this is not financial advice’, before adding that she wanted to share ‘what my friends just told me’ about the EthereumMax tokens
Figures show the value of the cryptocurrency plummeted by a whopping 98 per cent in July – just weeks after the stars had advertised it to their hundreds of millions of combined followers (Source: Coinmarketcap)
Pump-and-dump scams have been around ever since the conception of a market for securities.
The idea is that a person or group of people buy into a thinly traded asset such as a penny stock when its price is low.
They then start disseminating positive news about the asset. More often than not, that positive news is completely contrived. As more investors pile into the asset, the price continues to climb. Once the price is fully ‘pumped,’ the originator of the scam sells their stake to the buyers still coming in. Since they own a substantial percentage of the outstanding shares, it sends the price crashing.
Pump-and-dump schemes are a form of fraud. The originators of the scheme plan to take money from innocent investors by encouraging them to buy an asset based on false information. When those investors buy in, the pumper is selling, which effectively pushes the price lower. The result is big gains for the scammer and losses for all those defrauded.
There are a number of laws that make this illegal in the securities market. The Securities Act of 1933 specifically states that it’s criminal ‘to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact.’
You can find similar language in the Securities Exchange Act of 1934.
A pump-and-dump may also be considered wire fraud because the fraudsters typically use communication methods such as email, direct messaging, social media platforms, or direct phone calls to pump the stock.
One way to avoid a pump-and-dump scheme in the stock market is to focus on stocks traded on a well-known exchange such as the New York Stock Exchange or the Nasdaq. Those exchanges have strict listing requirements that won’t allow stocks most susceptible to pump-and-dump scams.
In the cryptocurrency market, sticking with well-known and broadly adopted cryptocurrencies such as Bitcoin (CRYPTO:BTC) and Ethereum (CRYPTO:ETH) and well-known exchanges like Coinbase (NASDAQ:COIN) and Binance should keep you out of trouble.
Source: fool.com
It adds: ‘The Promoter Defendants’ improper promotional activities generated the trading volume needed for all the Defendants to offload their EMAX Tokens onto unsuspecting investors.
‘While Plaintiff and Class members were buying the inappropriately promoted EMAX Tokens, Defendants were able to, and did, sell their EMAX Tokens during the Relevant Period for substantial profits.’
According to the document, Kardashian promoted EthereumMax in a June 2021 post on Instagram, when she had some 250 million followers.
‘Are you guys into crypto?’ she wrote in the post, followed by the disclaimer ‘this is not financial advice’, before adding that she wanted to share ‘what my friends just told me’ about the EthereumMax tokens.
She included the #AD hashtag to show the post was a paid advertisement, the lawsuit said.
Meanwhile, Mayweather promoted EthereumMax on his boxing trunks during a widely viewed exhibition fight with YouTube star Logan Paul in June, among other times.
The boxing match was streamed on Showtime and had up to 650,000 pay per view (PPV) buys in the US alone.
Representatives for Kardashian and Mayweather did not immediately respond to requests for comment.
EthereumMax, the company, was also named in the lawsuit.
‘The deceptive narrative associated with the recent allegations is riddled with misinformation about the EthereumMax project,’ EthereumMax said in a statement.
‘We dispute the allegations and look forward to the truth coming out.’
The lawsuit is seeking restitution and disgorgement of profits by the defendants.
It alleges: ‘In plain terms, EthereumMax’s entire business model relies on using constant marketing and promotional activities, often from ‘trusted’ celebrities, to dupe potential investors into trusting the financial opportunities available with EMAX Tokens.’
Former NBA player Paul Pierce also promoted EMAX in a Twitter post on May 26.
The lawsuit says that on that same day, the cryptocurrency was publicized as the ‘exclusive Cryptocurrency accepted for online ticket purchasing’ for Showtime’s Floyd Mayweather vs. Logan Paul fight.
The document says that by mid-July, EMAX had crashed to a record-low of $0.000000017 per unit.
Meanwhile, it alleged, the defendants ‘marketed the EMAX Tokens to investors so that they could sell their portion of the float for a profit.’
One expert branded the situation facing EMAX as ‘mind-boggling’, adding that he always advises celebrities to only enter into ad deals with companies they have a genuine affinity for.
Floyd Mayweather Jr promoted EthereumMax on his boxing trunks (pictured) during a widely viewed exhibition fight with YouTube star Logan Paul in June
The cryptocurrency was publicized as the ‘exclusive Cryptocurrency accepted for online ticket purchasing’ for Showtime’s Floyd Mayweather vs. Logan Paul fight (pictured)
Darren Heitner, Professor of Sports Law at the University of Florida, told MarketWatch: ‘In my years of representing athletes and celebrities, I constantly advise them that, beyond the legal language in any contract, they should always be sure that they genuinely have an affinity for the product or service that they are endorsing.
‘It is rarely beneficial for someone to enter into an inauthentic relationship with a brand, particularly if that person has accumulated significant wealth throughout his/her career.
‘That is what makes a situation like that concerning EthereumMax so mind-boggling.’
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