Kim Kardashian, Floyd Mayweather face 'pump and dump' crypto scam lawsuit

The class action over ethereum max has been filed in California.
The class action over ethereum max has been filed in California. Photo credit: Getty Images

Kim Kardashian and Floyd Mayweather are among those being sued for an alleged 'pump and dump' cryptocurrency scam.

The duo, alongside former NBA star Paul Pierce, are facing a class action lawsuit in California for advertising the ethereum max cryptocurrency, which briefly spiked in value during promotions from the star trio.

The token, which has no relationship to ethereum - the world's second largest cryptocurrency behind bitcoin - attracted tens of millions of dollars of transactions in June 2021 after the flurry of publicity.

At its peak each coin was worth US$0.000000597636, 196 times its previous value, but has since lost over 97 percent of its value according to CoinGecko.

The hype meant investors purchased the "losing investments" at inflated prices, allowing the defendants to cash out.

Plaintiff Ryan Huegerich, who is suing individually and on behalf of everyone covered by the class action lawsuit, says the celebrities worked with the creators of ethereum max to "misleadingly promote and sell the digital asset".

"The company's executives, collaborating with several celebrity promoters made false or misleading statements to investors through social media advertisements and other promotional activities," the lawsuit states

Kardashian was previously criticised by the head UK's Financial Conduct Authority (FCA) for an Instagram advert in which she asked her 250 million followers to join her in buying the cryptocurrency.

Charles Randell told a symposium there was "no shortage of stories of people who have lost savings by being lured into the cryptobubble with delusions of quick riches, sometimes after listening to their favourite influencers, ready to betray their fans' trust for a fee."

There have been reports that Kardashian's social media adverts are generally worth between US$300,000 to US$500,000 although it's not known how much she was paid to advertise ethereum max.

In the post she asked her millions of fans if they were into cryptocurrencies, saying: "This is not financial advice but sharing what my friends just told me about the ethereum max token!".

They were then invited to swipe up to "join the e-max community".

"She didn't have to disclose that ethereum max was a speculative digital token created a month before by unknown developers," Randell said.

Boxer Mayweather promoted ethereum max in the run up to and during his pay per view (PPV) fight with YouTube star Logan Paul.

Anyone who paid for tickets using the cryptocurrency was given the chance to win authentic Mayweather boxing gloves as well as receiving discounted prices.

The former world champion had the website address of ethereum max in red letters across the waistband of his shorts during the actual bout.

He had previously been fined by the US Securities and Exchange Commission (SEC) in 2018 for promoting cryptocurrency offerings without disclosing it was an advertisement.

Former NBA star Pierce promoted the token during tweets in which he bashed ESPN after the sports company had fired him for an unrelated video. 

"I don't need you. I got ethereum max," he wrote. "I made more money with this crypto in the past month than I did with y'all in a year."

The Wall Street Journal reported none of the trio had yet responded to requests for comment.

Some of the creators of ethereum max are also defendants in the lawsuit, while another 10 unknown 'John Doe' creators are also being sued with the intention to find out who they are during the discovery process for the lawsuit.

Kiwis have been told to be wary of cryptocurrencies, with Aotearoa's Financial Markets Authority (FMA) saying cryptocurrencies are speculative and high risk.

That means New Zealanders should only invest what they can afford to lose, the FMA said.