Court Refuses to Dismiss the EthereumMax Case

Big Win for Investors Means Bad News for Celebrity Promoters

On Tuesday, June 6, 2023, US District Judge Michael Fitzgerald in Los Angeles denied in part various motions to dismiss a case alleging that Kim Kardashian, Floyd Mayweather Jr., Paul Pierce (among others), engaged in fraudulent and misleading activities concerning the promotion of the EMAX token. The ruling is an important victory for investors and could have a wide-ranging impact on other crypto cases currently being litigated.

Lawyers for the celebrity promotors had sought the dismissal of consumer protection claims related to their promotions of the token. Judge had initially dismissed the claim last November, citing various technical issues with the pleading. However, on June 6, 2021, Judge Fitzgerald issued a lengthy decision on the amended complaint and concluded that Scott+Scott attorneys had “artifully” rectified the issues of consumer reliance.

According to the order, “the Court concludes that the fact that cryptocurrency scams advertised through social media are an increasingly frequent source of investment losses is relevant in determining the gravity of the harm for purposes of the unfair balancing test. Here, it is undeniable that there were winners and losers in the EMAX charade, and the Plaintiffs argue that it is unfair that the celebrities were the winners who profited off of the exploitation of their fans.” (Order at 73) Additionally, the Judge found that the “Defendants do not offer a single countervailing benefit of allowing celebrities to endorse unvetted products without disclosing that they are being paid to do so.” (Order at 74 – emphasis in original).

Next, while some of the other claims will need further amendment pursuant to the Court’s guidance, the consumer claim against Kardashian, Mayweather, and Pierce will now go into discovery. Scott+Scott plans to continue to vigorously litigate this case. According to Sean Masson, a partner who oversees the firm’s crypto litigation practice, “this is a thoughtful and well-reasoned decision from Judge Fitzgerald. It gives a clear roadmap for how to hold celebrity promoters accountable for their misleading promotions of dubious digital assets. We look forward to bringing this case forward to trial.”

Read more about the ruling and its implications here: