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EMAX investors given third and final chance at celeb promo suit

The judge presiding over a class suit by EMAX token investors gave them a final chance to file their claims against celebrities who allegedly promoted it.

The plaintiffs of the EthereumMax (EMAX) investor class action lawsuit have been given a final chance to amend their claims against the celebrities they accuse of promoting the now-defunct cryptocurrency. 

In an Oct. 3 court order, United States District Court Judge Michael Fitzgerald said he’s giving the EMAX investors a third and final chance to submit an amended complaint.

The class-action suit was brought against boxer Floyd Mayweather, NBA star Paul Pierce, reality TV star Kim Kardashian, and others in 2022 for allegedly promoting EMAX which the suit called a “pump and dump” scheme.

The judge dismissed the suit last year but revived it again in June refusing to throw out the plaintiff’s “unfair competition” claims against the celebrities. Four motions were dealt with in the new order.

An excerpt of Judge Fitzgerald's order explaining the motions that were before the court .Source: CourtListener

The court denied Mayweather's motion to dismiss the state consumer law claims, finding the plaintiffs sufficiently alleged materiality and Mayweather's failure to disclose that he was a paid promoter.

It also denied Pierce's motion to dismiss the state consumer law claims and manipulation claim, finding it was sufficiently alleged that Pierce or his agent sold and traded tokens for his benefit.

The court denied one of EMAX cofounder Giovanni Perone's motions to dismiss the same consumer claims but granted to amend dismissal of the securities claims for failing to allege Perone personally sold tokens.

The court said that the plaintiffs must re-file the complaint and the defendants must answer the remaining claims with Judge Fitzgerald writing:

“Plaintiffs have repeatedly failed to cure the deficiencies identified by the Court and were explicitly warned that this would be their last opportunity to amend.”

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According to its whitepaper, EthereumMax — which is not related to Ethereum — claimed to be a “culture token” that “bridges the gap between the emergence of community tokens and the well-known foundational coins of crypto.”

In October 2022, the U.S. Securities and Exchange Commission charged Kim Kardashian for unlawfully promoting the token as a security. She agreed to pay $1.26 million in penalties for her involvement.

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EMAX class action against Kim K and Mayweather is back on, says judge

While a federal judge dismissed the lawsuit last year, U.S. District Judge Michael Fitzgerald has given the plaintiffs a new chance at pursuing action against the celebrities.

Celebrity defendants Kim Kardashian and Floyd Mayweather are back on the hook for a class action lawsuit that alleges their improper promotion of the now-defunct crypto token EthereumMax (EMAX).

While the class-action suit was brought against the pair in January 2022 for allegedly promoting a “pump and dump” scheme, it was dismissed by a federal judge in California in December 2022.

However, in a new ruling on June 6, U.S. District Judge Michael Fitzgerald refused to throw out the plaintiff’s “unfair competition” claims against reality TV star Kardashian and boxing champion Mayweather for their role in promoting the EMAX token in 2021.

The judge has now seen it fit to amend the 162-page complaint alleging that Kardashian, Mayweather, and NBA star Paul Pierce “were profiting off endorsements at their fans’ expense by touting an investment opportunity that had no legitimate business plan.”

“The court is essentially dealing with an entirely new complaint, with new defendants and several new claims,” said Fitzgerald.

Excerpt from Ruling in Case CV 22-00163-MWF. Source: Thomson Reuters

Judge Fitzgerald said that hyping a crypto token without disclosing that you’ve been paid to do so is an “unscrupulous and thereby unfair practice.”

He added that the celebrity defendants provided no arguments to tip the balance in their favor.

“Defendants do not offer a single benefit of allowing celebrities to endorse unvetted products without disclosing that they are being paid to do so.”

However, he cautioned that the class-action lawyers from Scott+Scott would have to explain how the celebrity’s promotion of the token affected its prices.

Sean Masson of Scott+Scott said that misleading celebrity endorsements were the very essence of the Emax business model, according to Reuters.

Kardashian plugged the EMAX token in a June 2021 post on Instagram, while Mayweather wore the EMAX logo on his boxing trunks in a match against YouTube star Logan Paul in the same month.

According to its whitepaper, EthereumMax claims to be a “culture token” that “bridges the gap between the emergence of community tokens and the well-known foundational coins of crypto,” though it has nothing to do with Ethereum.

Related: Celebs who got burned endorsing crypto and those that got away with it

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 the EMAX promotion.

The class action sought damages for investors that bought the token following the celebrity shills though actual amounts were not specified.

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Celebrities Kim Kardashian, Paul Pierce, Floyd Mayweather and Others Ask Court To Drop New EthereumMax Lawsuit

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Defendants involved in the EthereumMax (EMAX) lawsuit are requesting that the California Central District Court dismiss the latest charges brought against them. In December, U.S. District Judge Michael W. Fitzgerald tossed a class-action lawsuit alleging that reality TV star Kim Kardashian, NBA legend Paul Pierce, boxing champion Floyd Mayweather Jr. and other defendants fraudulently promoted […]

The post Celebrities Kim Kardashian, Paul Pierce, Floyd Mayweather and Others Ask Court To Drop New EthereumMax Lawsuit appeared first on The Daily Hodl.

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SEC Puts Crypto-Friendly Celebrities on Notice, Fines NBA Legend Paul Pierce $1,400,000 for Plugging EthereumMax

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Class action against Kim K, Mayweather over EMAX dismissed… for now

Despite dismissing the case, the judge acknowledged the lawsuit reflects a potentially dangerous trend of fraudulent-like promotional schemes.

A federal judge in California has dismissed a class action lawsuit against reality TV star Kim Kardashian, boxing champ Floyd Mayweather and the founders of EthereumMax, explaining that the submissions failed to meet the “heightened pleading standards” for fraud claims.

The judge has, however, left room for the plaintiffs to refile the proposed class action lawsuit if certain provisions are amended.

In the original Jan. 7 court filing submitted by Scott+Scott Attorneys At Law, the plaintiffs argued that Kardashian, Mayweather, and also former NBA superstar Paul Pierce didn’t disclose they were being paid to promote EthereumMax (EMAX).

The plaintiffs alleged that they promoted it with the objective to “artificially inflate the price of the token” through the use of “false or misleading statements.”

Kim Kardashian promoted EMAX in a Jun. 2021 post on Instagram, while Floyd Mayweather wore the EMAX logo on his boxing trunks in a boxing match against YouTube star Logan Paul in the same month.

According to reports,  Judge Michael Fitzgerald dismissed the lawsuit on Dec. 7 on the grounds that the fraud allegations lacked merit and that investors at the end of the day also have the responsibility to conduct due diligence on their investments.

“But, while the law certainly places limits on those advertisers, it also expects investors to act reasonably before basing their bets on the zeitgeist of the moment.”

However in his dismissal, Judge Fitzgerald acknowledged the power that celebrities have been afforded by new technologies and social media platforms in establishing potentially fraudulent promotional schemes.

“This action demonstrates that just about anyone with the technical skills and/ or connections can mint a new currency and create their own digital market overnight,” Fitzgerald reportedly wrote in his dismissal.

Celebrities now have the ability to “readily persuade millions of undiscerning followers to buy snake oil with unprecedented ease and reach,” he added.

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But despite Judge Fitzgerald’s dismissal, the investor’s fight may not be over. Fitzgerald reportedly stated that he’d allow the plaintiffs to refile the lawsuit if the investor’s legal team amended a few provisions from its original filing, with the Judge making reference to the reciting of a provision under the Racketeer Influenced and Corrupt Organizations Act (RICO).

Kardashian has already been bitten once before over her promotion of EthereumMax on her social media account. 

On Oct. 3, Kardashian reached a $1.26 million settlement with the U.S. Securities Exchange Commission (SEC) after allegedly failing to disclose her $250,000 paid promotion by the EthereumMax.

Mayweather's legal team has long denied any affiliation with the EthereumMax, with his Attorneys stating that the investor’s filing did not “identify a single statement made by Mayweather about eMax tokens or EthereumMax.”

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How Crypto Twitter reacted to Kim Kardashian’s $1.26M SEC fine

Some pointed out the regulator's supposed hypocrisy, others told crypto-influencers to lawyer up, whilst a few poked fun at the reality TV star.

The crypto community reacted with a mix of disbelief and amusement after reality star Kim Kardashian was fined for promoting the cryptocurrency EthereumMax (EMAX). 

The United States Securities and Exchange Commission (SEC) fined Kardashian $1.26 million on Oct. 3, for “touting on social media” about the EMAX without disclosing she was paid $250,000 to post about it.

Kardashian has neither admitted to nor denied the SEC’s allegations, but settled the charges and agreed to not promote any cryptocurrency assets until 2025.

SEC chairman Gary Gensler tweeted the fine was a reminder that celebrity endorsement of investment opportunities doesn't “mean those investment products are right for all investors.”

Following Gensler’s tweet, the online crypto community expressed their thoughts on the fine, with some calling out the SEC for its inconsistent enforcement decisions. 

Economist Peter Schiff, known for his anti-Bitcoin (BTC) stance, pointed out what he perceived was an unfair targeting of Kardashian as the SEC hasn’t fined MicroStrategy co-founder Michael Saylor who he believes has “more to gain pumping crypto.”

Saylor responded saying Bitcoin isn’t a security but a commodity and its promotion would be “similar to promoting steel…or granite” and the coin's open protocol offers “utilitarian beliefs similar to roads.”

Crypto-personality and author Layah Heilpern shared she believed “the SEC has bigger issues closer to home it should probably focus on…” likely inferring the widely held belief in the community that certain U.S. politicians have inside traded.

Pseudonymous developer 0xBender noted a contrast between the SEC’s heavy-handed treatment of crypto promotions from celebrities, while crypto-centric influencers “have been out here shilling you garbage for 0.2 ETH (Ethereum) a tweet.”

Others such as former federal prosecutor Renato Mariotti said influencers thinking to endorse cryptocurrencies should “take note” as the regulator is showing it will “aggressively pursue enforcement actions” and those who promote crypto without considering the laws will “need to find a good lawyer.”

Meanwhile, Ethereum educator and investor Anthony Sassano told his followers he believes the SEC targeted Kardashian because it creates the illusion the regulator is “doing something” about crypto scams, and suggested it should've targeted the creators of EMAX instead.

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Still, some saw the lighter side of investing in a tumultuous and highly speculative crypto token, with journalist Tyler Conway saying the star “got the full crypto experience” by losing more money than she’d been paid.

Self-described hacker and tech content creator Marcus Hutchins said Kardashian “would have gotten better returns” in EthereumMax as it’s down 97% since her post, compared to the -80% the promotion returned for her.

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