Celebrity news in crypto has grown few and far between. The evangelists of last year are now quiet as the bear market expects to drag on for the foreseeable future. But, several have gotten caught up recently due to their involvement with the EthereumMax (EMAX-USD) project. Kim Kardashian, one of the biggest names who advertised the project, just won a class action lawsuit filed by investors. This news could be wildly detrimental to the safety of investors in the future.
EthereumMax was, like most other speculative tokens, a result of crypto’s wild surge in 2021. The project had sprouted up during the summer of that year, when it found its way into the mouths of a number of celebrities such as Floyd Mayweather Jr., Paul Pierce and Kim Kardashian.
The project doesn’t actually do anything noteworthy. Like its peers, it simply exists to accrue value thanks to hype. At the time these celebrities were endorsing it, though, it was a promised money-making machine. Kardashian posted about the project on her Instagram, saying the developers were “giving back to the entire E-Max community” by burning their administrator wallet. What she had failed to disclose was that she was paid to make the post.
To many, the project’s failure would come as no surprise. But many others had invested in it and lost plenty of cash as a result. Kardashian had put the classic “not financial advice” disclaimer on her post, but there’s no doubt the advertisement led to many an EMAX investment. This led to a class-action lawsuit against Kardashian — as well as Mayweather and Pierce — for using their influence to convince investors to buy the crypto.
The EthereumMax Lawsuit Is a Loss for Investors
Investors’ class-action suit against Kardashian and her peers stems from the idea their posts had a major influence on investment into EthereumMax and its EMAX token. Moreover, the celebrities did not properly disclose that these posts were advertisements and not genuine. Kardashian, for example, made $250,000 for her EMAX post.
The suit was filed in 2022, encapsulating investors’ anger with the crypto market. The feeling has only grown amid the crypto winter and the meltdowns of notable projects and companies like Terra (LUNA-USD) and FTX. While not many newsworthy updates have come of the suit since then, Kardashian wound up paying a $1.26 million fine to the Securities & Exchange Commission (SEC) relating to her EMAX post.
On Wednesday, the court threw cold water on investors when it threw out the lawsuit. Judge Michael Fitzgerald dismissed the case, saying the plaintiffs provided insufficient facts in their complaint. Fitzgerald adds to this ruling that “[the law] expects investors to act reasonably before basing their bets on the zeitgeist of the moment.”
The ruling is a major detriment to the investors wronged by Kardashian, her peers and bad-faith developers, sure. But moreover, it’s a detriment to the entire movement of cryptocurrency. Celebrity endorsements in cryptocurrency surged momentously last year, and many of the projects endorsed are worthless by now. Even the wildly popular Bored Ape Yacht Club non-fungible token (NFT) collection is a shadow of its former glory.
The dismissal of investors’ complaint against Kardashian ensures she and her peers escape scot-free. Sure, she paid a $1.26 million fine. But with a net worth of more than $1.8 billion, it’s hardly more than a slap on the wrist. Investors cannot be the only ones held in blame for a bad investment. It’s quite obvious advertisements in crypto do a poor job in disclosing that they are, in fact, advertisements. The news is disheartening for investor safety — something lawmakers everywhere say they will prioritize as regulations come forth.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.