Judge Allows State Class Actions Against EMAX Promoters to Proceed Following Pump and Dump Fallout

A federal judge has allowed state-level class action lawsuits against promoters of the EthereumMax (EMAX) token to proceed in New York, California, Florida, and New Jersey, while rejecting a broader nationwide claim [1]. The decision comes after US District Judge Michael Fitzgerald ruled that the proposed class actions satisfy the procedural requirements under the Federal Rules of Civil Procedure. However, he concluded that a nationwide class action would pose jurisdictional risks and complications due to differing state laws [1].

The lawsuits target high-profile individuals including Kim Kardashian, Floyd Mayweather, and former NBA star Paul Pierce, who publicly promoted the token in 2021 [1]. Investors who bought EMAX between May and June 2021 are central to the case, as the token’s price surged over 116,000% before plummeting nearly 99%, leading to significant losses for retail investors [1]. The token, described in its white paper as a “culture token,” became a viral sensation in crypto circles due to celebrity endorsements but faced sharp criticism as a potential “pump and dump” scheme [1].

Judge Fitzgerald previously dismissed the lawsuit in December 2022, arguing that investors should have conducted due diligence before investing [1]. However, plaintiffs were allowed to refile, and they did so seven months later in the same court. In a separate development, Kardashian settled with the US Securities and Exchange Commission (SEC) in October 2022 for $1.2 million over charges related to undisclosed payments for promoting EMAX [1].

In 2023, the SEC also charged Paul Pierce with violations of anti-fraud and anti-touting rules for promoting EMAX without disclosing payments he received for the endorsements [1]. Pierce agreed to pay $1.409 million in penalties and disgorgement without admitting or denying the SEC’s findings. The NBA star had promoted EMAX on social media, including a tweet featuring a screenshot of an account showing large holdings and profits, which the commission found misleading as it was not his personal account [1].

The continued legal scrutiny highlights the regulatory challenges surrounding cryptocurrency promotions and the responsibilities of celebrities and influencers in financial markets. The outcome of these state-level class actions could set a precedent for future cases involving digital asset promotions and investor protections.

Source: [1] Judge Allows State-Level Class Actions Against EthereumMax Promoters to Proceed (https://cryptonews.com/news/judge-allows-state-level-class-actions-against-ethereummax-promoters-to-proceed/)