Class action lawsuit alleges celebrities and EthereumMax executives made ‘false and misleading statements’
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.
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”.
Cryptocurrencies are an alternative way of making payments to cash or credit cards. The technology behind it allows the ‘money’ to be sent directly to others without it having to pass through the banking system. For that reason they are outside the control of governments and are unregulated by financial watchdogs – and transactions can be made in a way that keeps you reasonably pseudonymous.
If you own a crypto-asset you control a secret digital key that you can use to prove to anyone on the network that a certain amount of that asset is yours. If you spend it, you tell the entire network that you have transferred ownership of it, and use the same key to prove that you are telling the truth. Over time, the history of all those transactions becomes a lasting record of who owns what: that record is called the blockchain.
Bitcoin was one of the first and biggest cryptocurrencies and has been on a wild ride since its creation in 2009, sometimes surging in value as investors have piled in – and occasionally crashing back down. Dogecoin – which started as a joke – has also seen a stratospheric rise in value.
Sceptics warn that the lack of central control make crypto-assets ideal for criminals and terrorists, while libertarian monetarists enjoy the idea of a currency with no inflation and no central bank.
The whole concept of cryptocurrencies has been criticised for its ecological impact, with "mining" for new coins requiring vast energy reserves and the associated carbon footprint of the whole system.
Richard Partington and Martin Belam
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.”
The deceptive narrative associated with the recent allegations is riddled with misinformation about the EthereumMax project. We dispute the allegations & look forward to the truth coming out. Thank you #EMAX community for all of your ongoing support. #EthereumMax pic.twitter.com/RwML01cM4M
— EthereumMax ✪ (@ethereum_max) January 12, 2022
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.
The Guardian has approached Kardashian, Mayweather Jr and Pierce for comment.