Celebrities Kim Kardashian, former NBA star Paul Pierce and boxer Floyd Mayweather used their fame to hype a new cryptocurrency as part of a larger scheme to defraud investors while profiting for themselves, a lawsuit filed in California alleges.
Lawyers filed a class-action lawsuit on January 7 that claims the trio acted as celebrity endorsers of EthereumMax, or EMAX, which was pitched to investors as a disruptive new cryptocurrency. But those endorsements were a ruse by EthereumMax’s creators to inflate the price of the token, the complaint states.
The digital coin’s creators — Steve Gentile of Connecticut and Giovanni Perone of Florida — then sold their holdings of EthereumMax “for substantial profits,” according to the suit. Gentile and Perone “marketed the EMAX tokens to investors so that they could sell their portion of the float for a profit,” the lawsuit states.
EthereumMax denied the allegations in a statement to CBS MoneyWatch.
“The deceptive narrative associated with the recent allegations is riddled with misinformation about the EthereumMax project,” a company spokesperson said. “This project has prided itself on being one of the most transparent and communicative projects in the cryptocurrency space. We dispute the allegations and look forward to the truth coming out.”
Representatives for Kardashian, Mayweather and Pierce did not respond to requests for comment.
A raft of celebrities have touted cryptocurrencies. Among the high-profile figures to publicly back various digital coins: Matt Damon, Paris Hilton, Jamie Foxx, Ashton Kutcher, Gwyneth Paltrow and Dennis Cole, better known as Ghostface Killah of Wu-Tang Clan.
To be sure, celebrities have endorsed a range of products for decades. But suing famous endorsers has historically proven difficult because lawyers must prove the celebrity gained money illegally.
The lawsuit, filed on behalf of investor Ryan Huegerich of New York, doesn’t state who Gentile and Perone sold their EthereumMax to or for how much. The complaint also doesn’t say if Kardashian, Mayweather and Pierce profited from their holdings in the crypto.
Still, Huegerich’s lawyers allege EMAX amounted to a “pump and dump scam,” with celebrities used to promote the token to inflate its price, after which Gentile and Perone dumped their holdings.
EMAX launched last May with an initial trading volume of $16.1 million, according to data from CoinMarketCap. That figure grew after social media postings by Kardashian and Pierce as well as incentives from Mayweather — such as signed boxing gloves, ringside tickets and discounts to those who purchased fight tickets online using EMAX Tokens — the lawsuit argues. At one point, EMAX’s trading volume grew to almost $108 million.
In an Instagram post from June, Kardashian asked her more than 250 million followers, “are you guys into crypto?”
“This is not financial advice but sharing what my friends just told me about the Ethereum Max token,” Kardashian’s post read. “A few minutes ago Ethereum Mac burned 400 trillion tokens — literally 50% of their admin wallet giving back to the entire E-max community.”
EthereumMax saw its price continue to rise a month later.
“However, this meteoric rise did not last long, and EthereumMax began to deflate immediately after Kardashian’s post,” court documents state. “On July 15, the price of the EMAX token hit its all-time low: $0.000000017 per unit, a 98% drop from which it has not been able to recover.”
EthereumMax traded at that same $0.000000017 price on Wednesday.
Kardashian, Pierce, Mayweather and the EthereumMax creators are being sued for aiding and abetting, unjust enrichment and other violations of California state law. The lawsuit does not disclose how much money Huegerich invested in EthereumMax or how much he is seeking in damages.
Khristopher J. Brooks is a reporter for CBS MoneyWatch covering business, consumer and financial stories that range from economic inequality and housing issues to bankruptcies and the business of sports.
Original posted at www.cbsnews.com