A number of celebrities identified in promoting failed digital currency project EthereumMax (EMAX) has asked the court to dismiss the suit from disgruntled investors.
The celebrities, led by reality TV star Kim Kardashian and boxing legend Floyd Mayweather, argued that the class action lawsuit filed against them portrays the “same basic theory” that the courts have already struck out. In 2022, the court dismissed an initial lawsuit on the grounds that the celebrities’ actions in advertising the tokens did not amount to a pump-and-dump scheme.
“The Court otherwise dismissed the prior complaint in full due to fundamental flaws. The addition of new claims, Defendants, and over 100 pages of largely irrelevant allegations does not cure the defects,” the defendant’s filing read.
The plaintiffs argue in their updated filing that the celebrities promoting the project influenced them to buy EMAX tokens. In their defense, the defendants claim that aside from pushing an already rejected basic theory, the EMAX investors “suffered no injury from merely holding onto the tokens.”
Other points from the defendants include an argument that the plaintiff’s claims are barred because they relied on state consumer laws and an argument that the plaintiffs cannot prove that the defendant’s action caused a fall in EMAX tokens. The filing goes on to poke holes in the plaintiff’s move to advance a “guilty-by-social-acquaintance theory” and its decision to add “irrelevant and boilerplate allegations.”
In October 2022, Kardashian reached a $1.26 million settlement with the U.S. Securities and Exchange Commission (SEC) for failing to disclose that she was paid $250,000 to promote the Ethereum Max project on Instagram.
SEC sends strong warning note to celebrities shilling digital currencies
On February 17, SEC Chair Gary Gensler issued a strongly worded warning to influencers and celebrities promoting digital currencies to properly disclose the amounts they received to make the promotions.
“The federal securities laws are clear that any celebrity or other individual who promotes a crypto asset security must disclose the nature, source, and amount of compensation they received in exchange for the promotion,” Gurbir Grewal, Director of the SEC’s Division of Enforcement, said.
Grewal stated that the requirement is to allow investors to decide whether or not the security promoter is unbiased. At the moment, the SEC is pursuing enforcement action against NBA Hall of Famer Paul Pierce for his role in promoting EMAX tokens.
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