NBA Hall of Famer Paul Pierce and World Champion boxer Floyd Mayweather are among five celebrities sued Monday by cryptocurrency investors for EthereumMax (EMAX) scam, according to Sportico. The lawsuit also names Kim Kardashian, Russell Davis and Antonio Brown as defendants.
The SEC sued Pierce in February for failing to disclose that he received $244,000 from EMAX to promote the cryptocurrency on social media. In 2021, Pierce tweeted that he was “in for the long haul” on EMAX and then sold millions of the tokens just three days later. Pierce settled and paid $1.4 million in fines.
SEC Chair Gary Gensler warned the public on taking advice on investments from celebrities. He also warned celebrities to properly disclose financial incentives behind promoting investments.
“You can’t lie to investors when you tout a security,” Gensler said. “When celebrities endorse investment opportunities, investors should should know why celebrities are making those endorsements.”
Investors who lost money over the scam filed a subsequent lawsuit several weeks ago. Los Angeles District Judge Michael Fitzgerald did not reject the suit, but told investors they had one more chance to revise the claims. The key point is that the investors need to quantify how much Pierce and the others’ actions affected the value of EMAX.
In Monday’s filing of the suit, investors argued Pierce “had access to material, non-public information about the timing of various celebrity promotions of the EMAX Tokens.” It also says he “improperly used that information to perfectly time his purchases and sale of EMAX Tokens” to turn a profit.
The lawsuit lists Pierce as an “insider trading defendant” as well as a “promoter” defendant.
The EMAX scandal is a classic “pump and dump” scam. In such a scam, investors holding large amounts of an asset, such as a stock or, in this case, a cryptocurrency, publicly promote the asset to artificially inflate the price, then sell their holdings once the commodity’s price surges.
Because the value of the asset wasn’t real, and the investors running the scam held a massive percentage of the shares or tokens, the price then crashes, leaving the victims with a worthless asset. In this case, Pierce, the other celebrities, and the businesspeople who paid them walk away with an easy (illegal) profit.
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