Kim Kardashian is facing a lawsuit for allegedly scamming investors by promoting the EthereumMax cryptocurrency without disclosing her compensation.
EthereumMax (EMAX) is a cryptocurrency with no legal or business connection with Ethereum, despite its name.
It is a large language model that can generate text for various tasks, such as writing creative stories, solving mathematical problems, and answering questions.
Meta released EMAX in late February as a research tool for the AI community. EMAX was only for researchers who requested access and not for public use.
Kim Kardashian posted on her Instagram account in June 2021, saying:
“This is not financial advice but sharing what my friends tell me about the EthereumMax token.”
She did not disclose that she was paid $250,000 to promote EMAX.
UK’s FCA head Charles Randell said Kardashian’s post – marked as an ad – may have been “the biggest crypto promotion ever.”
The allegations against Kim Kardashian
The January alleges that EMAX executives schemed with celebrity promoters, including Kim Kardashian, boxer Floyd Mayweather Jr., and basketball player Paul Pierce, to hype EMAX tokens and sell them at a profit.
The investors allege that Kim Kardashian made false or misleading statements about EMAX on her social media posts.
For example, she said EMAX tokens would be accepted at certain nightclubs as payment for table reservations and suggested that EMAX tokens were scarce.
They also claim that they paid “inflated prices” for EMAX tokens and suffered losses when the price of EMAX plummeted. Kim Kardashian’s lawyers requested the court to dismiss false advertising claims over her social media posts.
The court denied the request. The judge said the investors adequately alleged the posts were “literally false.” He also found that a Kardashian post suggesting that EMAX tokens were scarce was misleading.
The Los Angeles court had dismissed the claims in November, stating, “There is just a lot that is wrong with this case.”
In Tuesday’s ruling, he noted that lawyers for the investors “artfully cured” some deficiencies in their previous version of the complaint.
However, he warned that he’s giving them one more opportunity to address remaining shortcomings in some claims, or they will be dismissed for good.
The implications of this case
This case highlights the risks and challenges of cryptocurrency promotion by celebrities.
Some celebrities may genuinely endorse certain cryptocurrencies, but others may accept payment to promote them without disclosing their financial interests or doing due diligence on the projects.
Investors who follow celebrity endorsements should be aware of these risks and do their own research before investing in any cryptocurrency.
They should also be wary of potential scams, such as “pump and dump” schemes, where misleading marketing is used to inflate the price of an asset and then sold at a profit.
The US Securities and Exchange Commission (SEC) has been cracking down on celebrity cryptocurrency promotion. In October, Kardashian agreed to pay the SEC $1.26 million to resolve allegations that she violated US regulations by promoting EMAX tokens.
She denied any wrongdoing. The SEC has also taken action against other celebrities, such as actor Steven Seagal, rapper T.I., and DJ Khaled, for promoting cryptocurrencies without disclosing their compensation.
