Celebrities including Kim Kardashian and Floyd Mayweather have urged a California federal judge to dismiss a second amended complaint from EthereumMax investors filed in December. The class action lawsuit claims the defendants conspired with the EthereumMax team to unlawfully promote their EMAX tokens, using promotional tactics such as celebrity endorsements.
However, according to the defendants’ motion to dismiss the complaint, the court had already rejected the investors’ “pump-and-dump” theory because these tokens do not have any inherent value apart from what the market is willing to pay. They stated: “The Court dismissed the prior complaint in full due to fundamental flaws. Adding new claims, Defendants, and over 100 pages of largely irrelevant allegations do not cure the defects.”
The motion suggests that investors allegedly held onto EthereumMax tokens due to misrepresentations from the celebrities, although the motion to dismiss claims that investors “suffered no injury from merely holding onto the tokens.” Kardashian has already been subject to penalties for EthereumMax promotions on social media; on October 3, she reached a settlement of $1.26 million with the United States Securities and Exchange Commission (SEC) for failing to disclose that she received a payment of $250,000.
The SEC recently reiterated its stance on celebrity endorsements of securities investments, warning stars that they must disclose payments and sources when promoting such investments. All of this comes in the wake of increased warnings from the SEC concerning celebrity crypto promotion. On February 17, 2021, the SEC reminded stars again that they must abide by disclosure laws when promoting investments in securities.