Kim Kardashian and Floyd Mayweather Jr. have won a preliminary court ruling that dismisses a lawsuit accusing them of defrauding EthereumMax investors.
Investors claimed in a January complaint that the reality television star and former boxing champion overvalued the EMAX tokens, causing them to pay “inflated prices” for blockchain-based digital assets. Paul Pierce, a former Boston Celtic, was also named as a defendant in the putative class-action lawsuit.
US District Judge said that Kim Kardashian didn’t view the tokens as a security
In a written order issued on Monday, US District Judge Michael Fitzgerald stated his “tentative view,” which is that the investors’ attorneys are “trying to act like” the US Securities and Exchange Commission, but “haven’t chosen to view the tokens as a security” and haven’t used a typical securities fraud claim in their case.
Fitzgerald claimed that for “obvious reasons,” the celebrities didn’t “care to label the tokens as a security.” The judge announced that he would later issue a formal written order.
Before the investor case receives a final ruling, a lawyer for Kim Kardashian declined to comment. An inquiry for comment was not immediately answered by an attorney for the investors. The decision is made in the midst of a larger discussion about the SEC’s regulatory authority over digital assets.
In October, the US markets watchdog revealed that Kim Kardashian had agreed to pay $1.26 million to resolve claims that she broke US regulations by promoting EMAX tokens. According to the SEC, Kardashian failed to disclose that she received $250,000 to post about the tokens on her Instagram account.
Kardashian reached a settlement without confirming or rejecting the SEC’s claims. She also consented to refrain for three years from promoting any new digital assets.
Anyone who advertises a security, such as a stock or even some varieties of cryptocurrencies, is required by law to disclose the amount, the source, and the nature of any payments they receive, in addition to the fact that they are being compensated for doing so.
Celebrities are also accused in several instances of promoting cryptocurrencies that end up as a scam or rug pull at a later stage.