In a tentative court ruling, Kim Kardashian and Floyd Mayweather Jr. won a
lawsuit accusing them of scamming EthereumMax investors. According to a
complaint filed in January, investors claimed that they paid "inflated
prices" for blockchain-based digital assets because EMAX tokens were hyped
by the reality star and ex-boxing champion.
The tentative ruling
comes just a month after the Securities and Exchange Commission accused
Kardashian of failing to disclose that she had been paid $250,000 to post
about tokens on Instagram. The celebrity had agreed to pay $1.26 million to
settle allegations that she broke the U.S. rules by touting EMAX
tokens.
Lawyers Are Acting Like the SEC, Judge Says
According to Bloomberg, U.S. District Judge Michael Fitzgerald
produced a written order on November 7 with a “tentative view” that lawyers
defending EMAX investors were “trying to act like” the U.S. Securities and
Exchange Commission (SEC) but “haven’t chosen to view the tokens as a
security”. He added that the defendants hadn't invoked a standard securities
fraud claim in the case.
Judge Fitzgerald said he would issue a
final written order later, but said that the accused celebrities did not
“label the tokens as a security for obvious reasons.” Lawyers for
Kardashian, 42, and Mayweather, 45, have failed to comment ahead of the
final ruling.
The Ruling Brings SEC Regulation Back Into View
Kardashian ran into trouble after a June 2021 Instagram in
which she wrote: “Are you guys into crypto? This is not financial advice but
sharing what my friends told me about the ethereum max token!” The token
surged after the post to her over 200 million followers but has since
crashed back to the same level it was at the time of the tweet, reminiscent
of a "pump and dump"
The latest court ruling on cryptocurrency
marketing places SEC regulatory efforts back in the spotlight. The regulator
has been locked in a long-running court battle with executives of Ripple,
founders of the XRP token, over its status as a security.
The Bottom Line
The court victory for Kim Kardashian and other celebrity crypto
endorsers highlights the need for clarity about cryptocurrencies as
security. Upon hearing the ruling, the SEC may double its efforts to have
the final say.
