On June 14, 2021, Kim Kardashian promoted a little-known company calledEthereumMax to her 225 million Instagram followers. She asked.
A week later, the price of EMAX had fallen 50%, and the volume of trade in the token had dropped by nearly 75%. The price of the coin never recovered, so anyone who followed Kardashian's advice lost a bundle.
According to a class action lawsuit filed in federal court in California by numerous investors, the last of several celebrity endorsements EMAX had relied on to drive up the price of the coin they released in May of 2021.
The suit claims that the founders of the company made big profits after cashing out right as prices jumped after online endorsements by Kardashian, former NBA star Paul Pierce and retired boxing champ Floyd Mayweather.
The investors said they only bought EMAX after learning of it through the publicity from Pierce, Mayweather and Kardashian's endorsements.
The suit argues that the misleading promotions and celebrity endorsements were able to artificially increase the interest in and price of the EMAX Tokens during the relevant period, causing investors to purchase these losing investments at inflated prices.
Attorneys for EthereumMax's co-founders, Steve Gentile and Giovanni Perone, didn't respond immediately to calls seeking comment.
The suit names Pierce, Mayweather and Kardashian as co-defendants. All three of the parties have filed motions to have them removed from the suit, arguing that they had no role in how the token was issued, sold or managed. The founders ofEthereumMax have sought to have the case dismissed, although a judge has yet to rule on any of the motions.
Messages left with the attorney who filed the suit, John Jasnoch, were not immediately returned.
Kardashian reached an agreement with the Securities and Exchange Commission on Monday to pay a $1.26 million fine related to her EMAX endorsement, which the agency said did not properly disclose that she had been paid $250,000 to promote.
The findings were neither admitted nor denied by Kardashian, and her lawyer, Michael Rhodes, said in a statement that she fully cooperated with the SEC investigation and that the SEC agreement allows her to move forward with her many different business pursuits. The marketing ploy was used by a number of marketing ploys to bring attention to their tokens. The SEC has also been clamping down on the practice, fining celebrities such as Mayweather, DJ Khaled, and Steven Seagal, for failing to make clear they had been paid to promote various criptocurrencies.
In the class action suit against EMAX, Kardashian's attorney has argued that his client has no financial stake in the company, and that her role in the matter consisted only of two Instagram posts that she had marked as advertisements.
Lawyers for Mayweather and Pierce have also argued that their clients had no real roles in how EMAX was operated and had no financial connection to the company, aside from collecting an endorsement fee. Their attorneys didn't immediately return calls for comment.
The suit noted that Mayweather had engaged more closely with EMAX during the run up and promotion of his exhibition match with influencer Jake Paul in June 2021, not long after the coin was launched. The suit said that EMAX was marketed as the only criptocurrency that would be accepted to buy tickets to the fight.
The suit also cited a tweet by Pierce, in which he claimed he made more money in a month investing in EMAX than he did while working as a commentator for ESPN.
The suit cites a survey conducted by Morning Consult, which found that 19% of people polled who had been aware of Kardashian's promotion of EMAX actually purchased the token.