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Kim Kardashian is among three celebrities being sued by investors in the EthereumMax crypto-currency.
Other defendants include boxer Floyd Mayweather Jr, basketball player Paul Pierce, and the currency’s creators.
The legal action alleges the celebrities collaborated with EthereumMax to “misleadingly promote and sell” the crypto-currency.
EthereumMax said it disputed the allegations and looked forward to the truth coming out.
In spite of its name, EthereumMax has no legal or business connection with the Ethereum crypto-currency.
‘Losing investments’
The class action claims EthereumMax operated a “pump and dump” scheme – where misleading marketing is used to inflate the price of an asset then sold to unwitting investors at a profit.
The complaint filed with the Central District Court of California alleges the “company’s executives, collaborating with several celebrity promotors” made “false or misleading statements to investors about EthereumMax, through social-media advertisements and other promotional activities”.
The defendants “touted” the ability of “investors to make significant returns”, it alleges, resulting in an artificial increase in the price of the crypto-currency, “causing investors to purchase these losing investments at inflated prices” and, in turn, enabling the executive staff of EthereumMax named in the legal action to “sell their EMax tokens to investors for a profit”.
“In plain terms, EthereumMax’s entire business model relies on using constant marketing and promotional activities, often from ‘trusted’ celebrities, to dupe potential investors into trusting the financial opportunities,” the court filing alleges.
Boxing match
It alleges former National Basketball Association (NBA) player Mr Pierce promoted EthereumMax in a “widely discussed” post on Twitter, in May 2021, “praising EthereumMax’s ability to make money for him”.
At the same time, EthereumMax started to use former world champion Mr Mayweather’s boxing match with YouTuber Logan Paul to promote the crypto-currency.
Mr Mayweather is said to have also promoted EthereumMax at a crypto-currency conference.
Finally, reality-TV personality Kim Kardashian, the complaint alleges, published an Instagram post, saying: “This is not financial advice but sharing what my friends tell me about the EthereumMax token.”
The head of the UK’s Financial Conduct Authority, Charles Randell, later said Ms Kardashian had “asked her 250 million followers to speculate on crypto tokens”, suggesting the post – marked as a an advert – may have been the “financial promotion with the single biggest audience reach in history”.
‘All-time low’
At the time, EthereumMax told BBC News its marketing and public-relations efforts “are always from an awareness perspective and not encouraging to purchase – as the Kim K post was simply intended to raise awareness of the project and its utility”.
“It is our intention that our marketing and PR efforts encourage people to research our project… before making a decision,” it said.
“This approach takes a lot of time, energy, and resources and is in stark contrast to the quick pump-and-dump schemes out there.”
However, such promotion caused the currency to increase in value to over 1,300% times its initial price before plummeting to “an all-time low” just over a month after Ms Kardashian’s post, the court filing alleges, enabling defendants to “offload” EthereumMax tokens “for substantial profits” while many of those who purchased currency during this period lost out.
‘Deceptive narrative’
The claim names as plaintiffs in the case those who invested between 14 May and 27 June 2021 and were “damaged thereby”.
EthereumMax denied the claims.
Steve Gentile, identified in the filing as the “co-founder/creator of EthereumMax”, told BBC News: “The deceptive narrative associated with the recent allegations is riddled with misinformation about the EthereumMax project.
“We dispute the allegations and look forward to the truth coming out.”
BBC News has sought comment from Ms Kardashian, Mr Mayweather and Mr Pierce.