What impact are Kim Kardashian’s Instagram posts having on crypto tokens? find out!
Three celebrities, including American media personality Kim Kardashian, boxer Floyd Mayweather, and former basketball player Paul Pierce, were recently sued by an investor for their promotion of altcoin EthereumMax (EMAX). What exactly happened?
Lead plaintiff Ryan Huegerich, a New York investor who bought EMAX, filed a class action lawsuit in the Central District Court of California. He claimed that the prominent promoters worked with EMAX executives Steve Gentile and Giovanni Perone to “make false or misleading statements to investors about EthereumMax through social advertising and other promotional activities.” The lawsuit alleges that the program artificially inflated the token’s value and “tricked potential investors into trusting the financial opportunities.”
Huegerich and other aggrieved investors bought EMAX tokens between May 14, 2021 and June 17, 2021 and suffered losses as a result of celebrity endorsements of the coin.
How celebrities from Kim K to Mayweather pumped up EMAX
In June 2021, Kim Kardashian posted an ad on her Instagram story to her then 220 million followers. Her post touted EMAX as the next big thing, with the caption “Are you into crypto??? This is not financial advice but sharing what my friends just told me about the Ethereum Max token! A few minutes ago, Ethereum Max burned 400 trillion tokens — literally 50% of their admin wallet that was given back to the entire EMAX community.” Her post ended with the hashtag #ad at the bottom of the screen, suggesting that EMAX she paid to promote the coin.
Likewise, Mayweather promoted EMAX prior to a boxing match featuring YouTuber Logan Paul, who wore a t-shirt with the EMAX logo printed on it during a highly publicized exhibition weigh-in with his opponent. EMAX was also accepted as payment for tickets to the Mayweather-Paul fight. For purchases over $5,000 with EMAX, viewers received boxing gloves signed by Mayweather.
Former NBA star Paul Pierce said in a Twitter post posted in May 2021 that he made more money in a month from EMAX than he did from his former employer ESPN in a year. He also encouraged his followers to check out the EMAX website.
Since its launch in May 2021, successive celebrity endorsements have seen EMAX’s value increase by 1,300% over its original price to AUD0.00000051 by early June 2021. However, it has lost over 99.7% of its price and is now selling for only around $0.000000001468.
The issues with EMAX and lessons for investors
Crypto commentators and investors have called EMAX a “Ponzi scam” and said the celebrities made “shillings” for it by making misleading or false claims about it. EMAX officials, however, denied the allegations, claiming: “The misleading account associated with the recent allegations is riddled with misinformation about the EthereumMax project. We deny the allegations and look forward to the truth coming out.”
This is a good lesson for potential crypto buyers to not make investment decisions based on influencer claims. Well-known cryptocurrencies such as Bitcoin are primarily highly risky and volatile, since they are almost exclusively speculative investments. Lesser-known altcoins like EMAX and Dogecoin are even more so. Their current forays could reverse at any moment, posing insurmountable risks for investors. Potential investors should therefore exercise even more caution.
The growing partnership between young influencers and crypto exchanges
A growing number of Gen Z social media influencers and young millennials have also partnered with cryptocurrency exchange companies to publish paid ads on various social media platforms. Teenage TikTok stars Charli and Dixie D’Amelio shared a post about cryptocurrency app Gemini with their millions of followers on Instagram. Coinbase sponsored YouTuber Mr. Beast’s video, with the influencer telling his 70 million subscribers that “Coinbase is the best place to buy Bitcoin, Ethereum, Dogecoin and many other cryptocurrencies.”
These influencers are typically followed by younger audiences who are typically financially savvy and easily manipulated by star power. Financial Conduct Authority Chair Charles Randell has warned that social media influencers can be used to spread cryptocurrency scams. He said: “There is no shortage of stories of people who have lost savings by being lured into the crypto bubble with get-rich-quick delusions, sometimes after listening to their favorite influencers, ready to bet their fans’ trust abusing a fee.”
Young investors should always do research before deciding to invest in crypto tokens. In 2017, the U.S. Securities and Exchange Commission’s (SEC) Office of Investor Education and Advocacy warned, “An endorsement by a celebrity does not mean an investment is legitimate or suitable for all investors. It’s never a good idea to make an investment decision just because someone famous says a product or service is a good investment.”
The SEC also suggests that investors should always do background research on any company they choose to invest in. For example, one can assume that EMAX is associated with Ethereum based on its name. However, EMAX has no relation to Ethereum and is not officially endorsed by the second largest cryptocurrency. This branding could be an attempt to mislead investors into believing that the token is part of the Ethereum network. It is advisable to do thorough research to ensure that your money is not funding useless projects or scams.
Cover image courtesy of Freepik
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