Kim Kardashian looks set to win crypto lawsuit

In a preliminary court decision, Kim Kardashian and Floyd Mayweather Jr. won. a lawsuit accusing them of defrauding EthereumMax investors. According to a complaint filed in January, investors claimed they paid “inflated prices” for blockchain-based digital assets because EMAX tokens were hyped by the reality star and ex-boxing champion.

The preliminary 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 violated US rules by touting EMAX tokens.

Lawyers act like the SEC, judge says

According to Bloomberg, US District Judge Michael Fitzgerald issued a written order on November 7 with a “preliminary view” that lawyers defending EMAX investors are “trying to act like” the US Securities and Exchange Commission (SEC), but “have not chosen to view tokens as collateral.” He added that the defendants had not pleaded a standard securities fraud claim in the case.

Judge Fitzgerald said he would make a final written order later, but said the accused celebrities did not “mark the symbols as a security for obvious reasons”. Lawyers for Kardashian (42) and Mayweather (45) have declined to comment before the final ruling.

The decision brings the SEC regulation back into view

Kardashian ran into trouble after an Instagram from June 2021 in which she wrote: “Are you guys into crypto? This is not financial advice but sharing what my friends told me about ethereum max token!” The token spiked after her post to 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 puts the SEC’s regulatory efforts back in the spotlight. The regulator has been locked in a long-running legal battle with executives of Ripple, the founders of the XRP token, over its status as a security.

The bottom line

The legal victory of Kim Kardashian and other celebrity crypto endorsers highlights the need for clarity about cryptocurrencies as security. After hearing the ruling, the SEC may redouble its efforts to have the last word.