Kim Kardashian Sued For Crypto Scam
In June 2021, Kim Kardashian posted an advertisement for the EthereumMax (EMAX) token to her 330 million Instagram followers on her story. While she made it clear that this was a sponsored post, with the inclusion of “#ad”, which is the norm for sponsored social media posts, she failed to disclose just how much the company paid her to promote their token.
This caused many of her fans to cause an uproar. They saw it as irresponsible for Kardashian, someone with major influence over large demographic, to promote a cryptocurrency without offering much education about the investment. They also saw it as dishonest that she did not mention how much she was paid for the advertisement.
It is that exact delineation that put Kardashian in hot water, having to pay over $1 million in penalties, disgorgement, and interest. But what exactly was the problem with this post? What is EthereumMax? We’ve answered all of those questions and more in the following article.
Why is Kim Kardashian Being Sued?
The direct quote from the Securities and Exchange Commission is that these charges arose for “touting on social media a crypto asset security offered and sold by EthereumMax without disclosing the payment she received for the promotion”.
Kardashian’s post mentioned the token by name and ticker symbol, included a link to the token’s website, and provided instructions for potential investors to purchase the token. SEC Chair Gary Gensler mentioned that “when celebrities or influencers endorse investment opportunities, including crypto asset securities, it doesn’t mean that those investment products are right for all investors”.
There are clear laws set over federal securities that state that any celebrity or other individual who promotes a crypto asset security must disclose the nature, source, and amount of compensation they received in exchange for the promotion. These laws are in place to ensure that potential investors can tell the difference between someone promoting a sponsor and someone promoting a project they believe in.
Kardashian was paid $250,000 to publish this post, and it was the failure to mention this that forced her to pay $1.26 million in fines. She has also agreed to not promote any more crypto asset securities for a period of at least 3 years. This was the first time the social media star had promoted cryptocurrencies on her page, and it is also likely the last time.
What is EthereumMax Token?
It is difficult to tell exactly what EthereumMax does from its website. They promise to create a “robust and scalable ecosystem that fully maximizes the power of decentralized finance (DeFi)”. EMAX offers cultural upside to the average crypto investor. According to the whitepaper, EMAX owners get special access to “the hottest restaurants and clubs”.
Their whitepaper also mentions bringing cryptocurrency to the mainstream and removing barriers for the everyday user. They go on to say that they’d like their ecosystem to be a “driving force in changing what the world considers to be currency”.
With very little in the way of programming behind the token, essentially, the EthereumMax simply exists, and depends on its popularity to thrive. The company touts the “Ethereum Max Ecosystem”, one that promises glamour and exclusivity, yet as of October 2022, there are not many practical uses for EMAX. A lot of the promises made in the roadmap and whitepaper have either not happened or been delayed due to the controversy of the SEC lawsuit.
Is EthereumMax a Scam?
Scam is a harsh word, and one that carries heavy connotations when used as a label for certain projects. While we cannot say outright that EthereumMax is a scam, we can say that there are many things to be wary about when it comes to this project.
For starters, the name “EthereumMax” may compel you to believe that the token is affiliated or is associated with the popular Ethereum network. However, this is not the truth, EthereumMax simply operates on the Ethereum blockchain, which is something that can be done by anyone with internet access.
Furthermore, the project’s website and whitepaper have no mention of any of the members of the development team. This is a major red flag, as it eliminates the need for someone to be held accountable for the project, should it fail to reach its goals. Knowing the identities and qualifications of the developers is an important for investors to know that they have put their money into something that can be trusted.
The marketing behind the token was also very suspicious. The celebrities and influencers who were paid to promote this token are not necessarily known for their knowledge of the cryptocurrency space, making it seem like it was designed to be marketed to people who don’t know much about the industry. This could be seen as a predatory marketing campaign, making promises to a demographic of people who don’t know any better.
These things make it hard to believe in the EMAX token, especially in an industry with so many “memecoins” and abandoned products, EthereumMax hardly inspires hope or belief to the informed investor.
Other Celebrities Being Sued for Promoting EthereumMax
Kim Kardashian is not the only celebrity facing charges for promoting this token. Famous boxer Floyd Mayweather also found himself in trouble with the SEC for promoting EthereumMax without disclosing the amount of compensation he received. Mayweather was also the target of another cryptocurrency related lawsuit back in 2018, one in which he also failed to mention how much he was compensated for his involvement in the project. Basketball Hall of Famer Paul Pierce was also mentioned in the EthereumMax lawsuit filed earlier this month.
This is not the only crypto related controversy to arise this year involving celebrity endorsements. Actors Matt Damon and Larry David caught major flak for appearing in commercials advertising FTX, a cryptocurrency exchange earlier this year. These commercials aired during the 2022 Super Bowl, introducing a very large audience to the world of cryptocurrencies. Some believe that this endorsement is irresponsible, as they could prompt ill-informed investors to sink money into tokens they don’t know much about.
Overall, we hope Kim Kardashian has learned her lesson about posting cryptocurrency advertisements and advise all readers of this article to be cautious of products like EthereumMax and any others which are promoted by celebrities on social media as it is likely they could be cryptocurrency scams.