Kim Kardashian and Floyd Mayweather Jr. won a tentative ruling dismissing a lawsuit accusing the celebrities of scamming investors in a cryptocurrency called EthereumMax.
(Bloomberg) — Kim Kardashian and Floyd Mayweather Jr. won a tentative ruling dismissing a lawsuit accusing the celebrities of scamming investors in a cryptocurrency called EthereumMax.
Investors claimed in a January complaint they paid “inflated prices” for blockchain-based digital assets because the reality television star and ex-boxing champion hyped the EMAX tokens. Former Boston Celtic Paul Pierce was also named as a defendant in the proposed class-action suit.
US District Judge Michael Fitzgerald in Los Angeles said Monday in a written order his “tentative view” is that lawyers for the investors are “trying to act like” the US Securities and Exchange Commission — but “haven’t chosen to view the tokens as a security” and didn’t invoke a standard securities fraud claim in their case.
Fitzgerald said the defendants also didn’t “care to label the tokens as a security for obvious reasons.” The judge said he will issue a final written order later.
“It seems here that there is just a lot that is wrong with this case,” the judge said at the outset of a hearing, according to a transcript.
John Jasnoch, an attorney for the plaintiffs, tried to persuade the judge to let him revise racketeering claims against the celebrities to show how they injured investors.
“If plaintiffs had known the true facts related to the promoters’ financial interest in the tokens, and that they were being paid to shill these tokens, they wouldn’t have paid as much for the tokens as they did,” he said, according to the transcript.
Michael Rhodes, a lawyer for Kardashian, declined to comment before a final ruling is issued.
The tentative ruling comes amid a broader debate over the SEC’s regulatory authority over crypto assets.
Why Crypto Flinches When SEC Calls Coins Securities: QuickTake
The US markets regulator announced in October that Kardashian had agreed to pay $1.26 million to settle allegations that she broke US rules by touting EMAX tokens. The SEC said Kardashian didn’t disclose that she was paid $250,000 to post on her Instagram account about the tokens.
Kardashian settled without admitting or denying the SEC allegations. And she agreed to refrain from touting any additional digital assets for three years.
The law requires anyone who touts a security, such as a stock or even some types of cryptocurrencies, to not only say they are getting paid to do so, but also to disclose the amount, the source, and the nature of those payments.
(Updates with details of court hearing.)
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