Kim Kardashian arrives for the 2018 Met Gala on May 7, 2018 at the Metropolitan Museum of Art in New York.
Angela Weiss | AFP | Getty Images
Kim Kardashian and Floyd Mayweather are being sued over allegations that they misled investors by introducing a little-known cryptocurrency called EthereumMax to their millions of social media followers.
A class action lawsuit filed in U.S. District Court for the Central District of California last Friday alleges that EthereumMax and its celebrity sponsors colluded to artificially inflate the token's price by posting "false or make misleading statements”.
Kardashian caused a stir last year when she published an Instagram post promoting the EthereumMax token. "Are you into crypto????" wrote Kardashian. “This is not financial advice but sharing what my friends just told me about the Ethereum Max token!”
Kardashian added the hashtag #ad to the message, suggesting she was paid to promote it. It is not clear how much Kardashian was paid by EthereumMax, although estimates put her fee per sponsored Instagram post at between $500,000 and $1 million.
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 alleges and greatly boosted trading volume.
Mayweather also promoted EthereumMax at a major Bitcoin conference in Miami and was subsequently booed off the stage. Mayweather does not appear to have disclosed payment for its promotion of the token, the lawsuit states.
The lawsuit alleges that plaintiff Ryan Huegerich, a resident of New York, 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% of its value since early June, leading some investors to dub it a “pump and dump” scheme, where scammers attempt to inflate an asset’s price by providing false or misleading information to drive. The allegation emerges in Hügerich's lawsuit accusing Kardashian and Mayweather of "shaming" EthereumMax.
EthereumMax "has no affiliation" with Ether, the second-largest cryptocurrency, the lawsuit states, and adding its branding appears to be an attempt to mislead investors into believing the token is part of the Ethereum network.
Kardashian and Mayweather representatives were not immediately available when contacted by CNBC. EthereumMax has not responded to a request for comment on Twitter.
It's not the first time celebrities have gotten into trouble for endorsing cryptocurrencies – much to the chagrin of regulators.
In 2018, Mayweather was sacked by the U.S. Securities and Exchange accused of conducting 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, Chairman of the UK Financial Conduct Authority, highlighted Kardashian's Instagram promotion of EthereumMax in a speech warning of crypto scams. Randell said that while he couldn't say if EthereumMax is specifically a scam, "social media influencers are routinely paid by scammers to help them pump and dump new tokens based on pure speculation."