(Bloomberg) — Kim Kardashian failed to persuade a judge to throw out a lawsuit in which she’s accused of scamming investors in a cryptocurrency called EthereumMax by falsely hyping the digital tokens.
Floyd Mayweather Jr. fared better, with the judge finding that his public statements about the growth prospects for the EMAX token were mostly harmless.
But investors who claim they paid “inflated prices” for the blockchain-based digital assets will get a chance to revise and refile their allegations that the ex-boxing champion failed to disclose he was being paid to promote EMAX.
US District Judge Michael Fitzgerald in Los Angeles on Tuesday rejected arguments by Kardashian’s lawyers that he should dismiss false advertising claims over her social media posts in which she said EMAX tokens would be accepted at certain night clubs as payment for table reservations.
The judge said the investors adequately alleged the posts were “literally false.” He also found that a Kardashian post suggesting that EMAX tokens were scarce was misleading.
Fitzgerald had dismissed the claims in November, saying “there is just a lot that is wrong with this case.” In Tuesday’s 84-page ruling, he noted that lawyers for the investors “artfully cured” some deficiencies in their previous version of the complaint, but warned that he’s giving them just one more opportunity to address remaining shortcomings in some claims or they will be dismissed for good.
In addition to targeting celebrity promoters, investors sued several EMAX co-founders and consultants.
A lawyer for Kardashian didn’t immediately respond to a request for comment.
Mayweather can’t be sued for stating his “belief” about the future growth of EMAX at a 2021 Bitcoin conference, because that amounts to “quintessential nonactionable puffery,” the judge said.
The US Securities and Exchange Commission 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.
The case is In Re EthereumMax Investor Litigation, 22-cv-00163, US District Court, Central District of California (Los Angeles).
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