Kim Kardashian and Floyd Mayweather Jr. won a preliminary court ruling dismissing a lawsuit accusing the celebrities of defrauding investors in a cryptocurrency called EthereumMax.
Investors claimed in a January complaint that they paid “inflated prices” for blockchain-based digital assets because the reality TV star and ex-boxer hyped the EMAX tokens. Former Boston Celtic Paul Pierce was also named as a defendant in the proposed class action.
U.S. District Judge Michael Fitzgerald said in a written order Monday that his “preliminary view is that attorneys for the investors are “attempting to act” like the U.S. Securities and Exchange Commission — but “have not chosen to see the tokens as a security” and invoked not a standard securities fraud claim in their case.
Fitzgerald said the celebrities also didn’t mind marking the tokens as collateral for obvious reasons. The judge said he will issue a final written order later.
A lawyer for Kardashian declined to comment pending a final decision in the investor case. A lawyer for the investors did not immediately respond to a request for comment.
The ruling comes amid a broader debate over the SEC’s regulatory authority over cryptoassets.
The U.S. market regulator announced in October that Kardashian had agreed to pay $1.26 million to settle that she broke U.S. rules by touting EMAX tokens. The SEC said Kardashian did not disclose that she was paid $250,000 to post on her Instagram account about the tokens.
Kardashian settled without admitting or denying the SEC. And she agreed to refrain from touting any further digital assets for three years.
The law requires anyone touting a security, such as a stock or even some types of cryptocurrencies, to not only say they are being paid to do so, but also to disclose the amount, source and nature of those payments.
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