Celebrity defendants Kim Kardashian and Floyd Mayweather are back in the spotlight as a class action lawsuit against them, alleging their improper promotion of the now-defunct crypto token EthereumMax (EMAX), resumes. The suit was initially dismissed by a federal judge in December 2022, but U.S. District Judge Michael Fitzgerald recently revived “unfair competition” claims against Kardashian and Mayweather for their role in promoting the EMAX token in 2021.
The 162-page complaint accuses Kardashian, Mayweather, and NBA star Paul Pierce of profiting off endorsements at their fans’ expense by touting an investment opportunity that had no legitimate business plan. Judge Fitzgerald emphasized that promoting a crypto token without disclosing that you’ve been paid to do so is an “unscrupulous and thereby unfair practice.”
Furthermore, the judge stated that the defendants provided no benefits of allowing celebrities to endorse unvetted products without revealing they were paid to do so. However, the class-action lawyers from Scott+Scott will have to explain how their promotion of the EMAX token affected its prices. Sean Masson of Scott+Scott points out that misleading celebrity endorsements are the essence of the Emax business model.
In June 2021, Kardashian endorsed the EMAX token on Instagram, and Mayweather sported the EMAX logo on his boxing trunks during a match against YouTube star Logan Paul. While the token claims to be a “culture token” that “bridges the gap between the emergence of community tokens and the well-known foundational coins of crypto,” it has no connection to Ethereum.
In October 2022, the Securities and Exchange Commission charged Kardashian for unlawfully touting a crypto security. She agreed to pay $1.26 million in penalties for her involvement in promoting EMAX. The class action lawsuit seeks damages for investors who bought the token following the celebrities’ endorsements, though specific amounts were not detailed.
This lawsuit highlights the potential dangers and ethical concerns associated with celebrity endorsements of cryptocurrency projects. While celebrities offer increased visibility for these projects, their lack of disclosure regarding compensation can lead to suspicions of “pump and dump” schemes or an unfair advantage being taken of their fans’ trust. As regulators and the legal system continue to grapple with these issues, investors and enthusiasts alike must weigh the potential benefits of celebrity-backed ventures against the associated risks.
Source: Cointelegraph
