Why Investors Are Suing Kim Kardashian, Other Celebs, For False Crypto Sales Pitches

People may have noticed a growing number of television ads featuring movie stars like Matt Damon, as well as the naming of sports arenas - like those of the LA Lakers and Miami Heat - for cryptocurrency companies. 

The marketing push is an integral part of an effort to gain public acceptance of cryptocurrencies as a 'safe' investment as well as to promote their value. But as this week's lawsuit suggests, there are growing concerns that much of crypto investment is a classic 'pump and dump' scheme in which promoters use celebrities to hype the value of an asset like crypto, then sell into the rising interest in order to make a quick financial killing before the gullible discover they've been sold a falsely overvalued product. Of course, there are those who believe that anyone who buys a complex financial instrument from Kim Kardashian probably gets what they deserve. JL

Rob Davies reports in The Guardian:

According to a class action lawsuit filed in a California court, EthereumMax, in collaboration with Kardashian, Mayweather Jr and basketball player Paul Pierce, sought to enrich themselves by making “false and misleading” statements to investors. The lawsuit claims they were inflating the value of their own tokens in order to sell them at a profit to investors who ended up holding artificially overvalued assets. The value of the company’s EMAX tokens increased by as much as 1,370% after the media marketing blitz before crashing to an all-time low.

The reality TV star Kim Kardashian and boxing champion Floyd Mayweather Jr are among celebrities being sued over their promotion of an alleged “pump and dump” cryptocurrency scheme that investors say caused them to lose money.

According to a class action lawsuit filed in a California court, executives of EthereumMax, in collaboration with Kardashian, Mayweather Jr and the basketball player Paul Pierce, sought to enrich themselves by making “false and misleading” statements to investors.

Promotions by the company included an Instagram post to Kardashian’s 250 million followers that the head of the UK’s Financial Conduct Authority, Charles Randell, said may have had “the single biggest audience reach in history” for a financial product.

Boxer May Kato/Reuters

The value of the company’s EMAX tokens increased by as much as 1,370% after the media marketing blitz before crashing to an all-time low, the suit claims.

By using celebrity endorsements, the claimants say, EthereumMax’s executives, “touted the prospects of the company and the ability for investors to make significant returns due to the favourable ‘tokenomics’ of the EMAX Tokens”. Instead, the lawsuit claims, they were concerned with inflating the value of their own tokens in order to sell them at a profit to investors who ended up holding artificially overvalued assets.

EthereumMax dismissed the allegations in a statement made via the company’s Twitter account.

“The deceptive narrative associated with the recent allegations is riddled with misinformation about the EthereumMax project,” it said. “We dispute the allegations and look forward to the truth coming out.”

EthereumMax previously told the BBC that Kardashian’s Instagram post was “simply intended to raise awareness of the project and its utility”.

Mayweather Jr is alleged to have promoted EthereumMax at a cryptocurrency conference while Pierce, nicknamed Truth, tweeted that the company had made money for him.