A class action lawsuit filed last Friday in the U.S.
District Court for the Central District of California accuses EthereumMax and
its celebrity promoters of working together to artificially inflate the price
of the token by making "false or misleading statements" in social
media posts.
Kardashian caused a stir last year when she made an
Instagram post promoting the EthereumMax token. "Are you guys into
crypto????" Kardashian wrote. "This is not financial advice but
sharing what my friends just told me about the Ethereum Max token!"
Kardashian included the hashtag #ad in the message,
suggesting she was paid to promote it. It's not clear how much Kardashian was
paid by EthereumMax, though estimates have placed her fee per sponsored
Instagram post in the $500,000 to $1 million range.
Meanwhile, Mayweather endorsed the token in his boxing match
with YouTube star Logan Paul. EthereumMax was accepted as payment for tickets
to the event, a move the lawsuit claims boosted trading volumes sharply.
Mayweather also promoted EthereumMax at a major bitcoin
conference in Miami, and was subsequently booed off stage. Mayweather doesn't
appear to have disclosed payment for his promotion of the token, the lawsuit
said.
The lawsuit claims that plaintiff Ryan Huegerich, a New York
resident, and other investors who purchased EthereumMax tokens between May 14,
2021, and June 17, 2021, suffered losses as a result of the celebrities'
conduct.
EthereumMax has lost around 97% of its value since early
June, leading some investors to label it as a "pump and dump" scheme
where scammers attempt to boost the price of an asset through false or
misleading statements. The accusation features in Huegerich's lawsuit, which
accuses Kardashian and Mayweather of "shilling" EthereumMax.
EthereumMax "has no connection" to ether, the
second-largest cryptocurrency, the lawsuit said, adding its branding appears to
be an effort to mislead investors into believing the token is part of the
Ethereum network.
A spokesperson for the EthereumMax project disputed
accusations that it was running a scam, stating the lawsuit was "riddled
with misinformation."
"This project has prided itself on being one of the
most transparent and communicative projects in the cryptocurrency space,"
the spokesperson said. "We dispute the allegations and look forward to the
truth coming out."
It's not the first time celebrities have been in hot water
for cryptocurrency endorsements — much to the ire of regulators.
In 2018, Mayweather was charged by the U.S. Securities and
Exchange Commission with pumping an initial coin offering, a controversial
crypto crowdfunding method. Mayweather paid over $600,000 in a settlement with
the SEC, without admitting or denying the regulator's findings.
In September 2021, Charles Randell, chair of the U.K.'s
Financial Conduct Authority, singled out Kardashian's Instagram ad for
EthereumMax in a speech warning about crypto scams. Randell said that while he
couldn't say if EthereumMax specifically was a scam, "social media
influencers are routinely paid by scammers to help them pump and dump new
tokens on the back of pure speculation."
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