Several celebrities have been involved in crypto pump-and-dump and have been sued by investors who lost money.
Three celebrities that promoted a crypto currency last year now face a lawsuit from a group of investors that lost money. They are reality TV star Kim Kardashian, heavily-decorated boxer Floyd Mayweather Jr., and Paul Pierce.
The trio lent their names to the EthereumMax token, which they pumped and dumped with the creators.
Investors that bought into EthereumMax between May and June last year were allegedly left with worthless cryptos and are alleging they were scammed.
Kardashian and Pierce used their considerable social media following to advertise the token. Kardashian posted about it on her Instagram Stories, where she told her followers that she heard about EthereumMax from her friends and included links to the website. Mayweather used it to accept payments for tickets for his bout with Logan Paul. He even wore shorts bearing the name of the crypto token during the exhibition match.
All three are joined to the lawsuit for getting paid to push EthereumMax. To support their claim, the suit includes data from a Morning Consult poll that proved 19 percent of Kardashian’s followers invested in EthereumMax as a direct result of the celebrity’s posts on her social media. The plaintiffs want monetary compensation for the losses they suffered.
The lawsuit reads in part, “In furtherance of this scheme, Defendants touted the prospects of the Company and the ability for investors to make significant returns due to the favorable “tokenomics” of the EMAX Tokens. In truth, Defendants marketed the EMAX Tokens to investors so that they could sell their portion of the Float for a profit. Defendants’ strategy was a success. The misleading promotions and celebrity endorsements were able to artificially increase the interest in and price of the EMAX token.”
EthereumMax started at $0.00000006 and shot up by more than 1,000 percent within two weeks. However, its fortune was reversed and quickly plummeted to below its starting value. The creators conveniently sold off their shares before the crash, as evident from their wallet’s activities.
The identity of the group behind EthereumMax remains unknown.
Pumping and dumping cryptos became common in 2021, with celebrities jumping on the trend of launching their own currencies and using their clout to promote them. With people eager to amass a fortune, these cryptos jump in value as they are rushed – the pump. However, the creators eventually sell their tokens, often in billions, causing the value to crash suddenly – the dump-, leaving holders with worthless crypto.
The cryptos are usually of small value, like how EthereumMax started. However, since hundreds of billions of the tokens are created, they add up to tidy sums when sold.
It is possible to pump and dump traditional stocks, but the practice is illegal. However, there is no framework in place for regulating crypto trading. This is ironic because one of the selling points of crypto currencies is that they are free from regulations, unlike traditional fiat.
This is not the first time Mayweather has been embroiled in crypto issues. The Securities Exchange Commission charged him in 2018 in connection with another crypto created by Centra Tech. The boxer did not reveal he was paid $100,000 to promote the crypto. Some of Centra Tech’s founders eventually got hit with securities fraud and wire fraud charges for misleading investors with false claims of relationships with established financial institutions.