Kim Kardashian and Floyd Mayweather are being sued over allegations they misled investors when promoting a little-known cryptocurrency called EthereumMax to their millions of social media followers.
A class action lawsuit filed last Friday in the U.S. District Court for the Central District of California accuses EthereumMax and its celebrity promoters of working together to artificially inflate the price of the token by making “false or misleading statements” in social media posts.
Kardashian caused a stir last year when she made an Instagram post promoting the EthereumMax token. “Are you guys into crypto????” Kardashian wrote. “This is not financial advice but sharing what my friends just told me about the Ethereum Max token!”
Kardashian included the hashtag #ad in the message, suggesting she was paid to promote it. It’s not clear if Kardashian was paid by EthereumMax, though estimates have placed her fee per sponsored Instagram post in the $500,000 to $1 million range.
Meanwhile, Mayweather endorsed the token in his boxing match with YouTube star Logan Paul. EthereumMax was accepted as payment for tickets to the event, a move the lawsuit claims boosted trading volumes sharply.
Mayweather also promoted EthereumMax at a major bitcoin conference in Miami, and was subsequently booed off stage. Mayweather doesn’t appear to have disclosed payment for his promotion of the token, the lawsuit said.
The lawsuit claims that plaintiff Ryan Huegerich, a New York resident, and other investors who purchased EthereumMax tokens between May 14, 2021, and June 17, 2021, suffered losses as a result of the celebrities’ conduct.
EthereumMax has lost around 97 percent of its value since early June, leading some investors to label it as a “pump and dump” scheme where scammers attempt to boost the price of an asset through false or misleading statements. The accusation features in Huegerich’s lawsuit, which accuses Kardashian and Mayweather of “shilling” EthereumMax.
EthereumMax “has no connection” to ether, the second-largest cryptocurrency, the lawsuit said, adding its branding appears to be an effort to mislead investors into believing the token is part of the Ethereum network.
Representatives for Kardashian and Mayweather were not immediately available when contacted by CNBC. EthereumMax did not return a request for comment on Twitter.
It’s not the first time celebrities have been in hot water for cryptocurrency endorsements — much to the ire of regulators.
In 2018, Mayweather was charged by the U.S. Securities and Exchange Commission with pumping an initial coin offering, a controversial crypto crowdfunding method. Mayweather paid over $600,000 in a settlement with the SEC, without admitting or denying the regulator’s findings.
In September 2021, Charles Randell, chair of the U.K.’s Financial Conduct Authority, singled out Kardashian’s Instagram ad for EthereumMax in a speech warning about crypto scams. Randell said that while he couldn’t say if EthereumMax specifically was a scam, “social media influencers are routinely paid by scammers to help them pump and dump new tokens on the back of pure speculation.”