Kim Kardashian, boxer Floyd Mayweather, former NBA star Paul Pierce and others face a proposed class action lawsuit that alleges the parties misled consumers who invested in EthereumMax (EMAX) cryptocurrency tokens amid a roughly month-long “pump and dump” scheme.
The 25-page lawsuit alleges the defendants essentially misrepresented EMAX tokens on social media as a way to “instill trust” with investors, and disguised their control over both EthereumMax the company and a “significant portion” of the total digital EMAX assets available for public trading between May 14 and June 27, 2021. The case claims that while regular investors were buying EMAX tokens “inappropriately promoted” by the celebrities, the defendants were able to offload their own EMAX assets in exchange for substantial profits.
As the case tells it, EthereumMax executives disguised their control over EMAX in order to avoid scrutiny and facilitate the alleged price-pumping scheme before “conspir[ing]” with the celebrities. Overall, the complaint alleges Kardashian, Mayweather, Pierce and EthereumMax execs Steve Gentile, Giovanni Perone and Justin French, along with an unnamed “Defendant X” believed to be the corporate entity behind the company, misleadingly touted the tokens to investors so as to artificially boost EMAX prices and sell their portion of the assets for a profit.
“Defendants’ strategy was a success,” the lawsuit claims. “The misleading promotions and celebrity endorsements were able to artificially increase the interest in and price of the EMAX Tokens during the Relevant Period, causing investors to purchase these losing investments at inflated prices.”
Launched by the executive defendants on May 14, 2021, the EMAX token is described in the filing as a speculative digital token created by a “mysterious group of cryptocurrency developers.” More specifically, EMAX tokens are blockchain-based digital assets known as ERC-20 tokens created using the Ethereum blockchain. Once created, an ERC-20 token can be traded, spent or otherwise transacted with. According to the complaint, EMAX tokens were not sold throughout the relevant time period pursuant to a “whitepaper,” which traditionally gives investors the technical information about a token’s concept and a roadmap for how it plans to grow and succeed.
In October 2021, however, EthereumMax released a whitepaper that explained the company’s business model and described its activities from May 14 to June 27, 2021, the suit says. According to the lawsuit, the whitepaper, “[i]n plain terms,” relayed that EthereumMax’s entire business model relied on the use of “constant marketing and promotional activities, often from ‘trusted’ celebrities, to dupe potential investors” into trusting the tokens.
The suit charges that the “pump” portion of the alleged scheme began at the time Kardashian, Mayweather and Pierce signed on to serve as promoters for the launch of EMAX tokens in May 2021. Per the suit, the celebs received EMAX tokens and/or other considerations as part of their compensation.
Pierce, the lawsuit says, promoted EthereumMax widely on Twitter during a public spat last May with ESPN, who fired Pierce as a basketball analyst over what the network felt was an inappropriate video he posted to his social media account. After his firing, Pierce tweeted that he “made more money with [EthereumMax]” in a month than he did with ESPN in a year, and didn’t need the network, the lawsuit says.
The same day, May 26, the company issued a press release announcing that it was the exclusive cryptocurrency of the Floyd Mayweather versus internet-celebrity-turned boxer Logan Paul Pay-Per-View fight on June 6, 2021, the suit continues.
According to the complaint, trading volume “exploded” for the EMAX token as a result of Pierce’s Twitter post and the company’s announcement of its partnership with Mayweather. The EMAX token volume had reached $44.43 million, almost five times higher than the previous day, before more than doubling to $107.7 million on May 27, the case says.
The lawsuit says EMAX token trading volume spiked from $15.7 million to $24.5 million between June 4 and June 6 in the aftermath of Mayweather’s bout with Logan Paul. On June 14, 2021, Kardashian joined the conversation by posting about EthereumMax to her more than 250 million Instagram followers, the case adds.
As the complaint tells it, however, the meteoric rise of EthereumMax attributed in part to Pierce, Mayweather and Kardashian’s involvement did not last long, as the company “began to deflate almost immediately after Defendant Kardashian’s post.” According to the case, the price of the EMAX token hit its all-time low, $0.000000017 per unit, on July 15, 2021, a 98 percent drop from which the suit says it has been unable to recover.
The lawsuit alleges the celebs’ “improper promotional activities” for EthereumMax generated the trading volume needed for the defendants to offload their EMAX tokens onto unsuspecting investors.
“While Plaintiff and Class members were buying the inappropriately promoted EMAX Tokens, Defendants were able to, and did, sell their EMAX Tokens during the Relevant Period for substantial profits,” the case alleges.
The lawsuit looks to represent all persons who, between May 14 and June 27, 2021, bought EthereumMax’s EMAX tokens and were subsequently damaged thereby.
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