You can understand Kim Kardashian and former NBA star Paul Pierce getting snared, but you’d think Floyd Mayweather would have learned to avoid crypto endorsements by now.
Along with the reality TV celebrity and former hoops player, the weight-class jumping boxing champion is being sued in California federal court for making false and misleading statements while promoting EthereumMax, a cryptocurrency that an investor claims was a pump-and-dump scam, Law360 reported.
In November 2018, the boxing champion paid more than $600,000 in fines for failing to reveal that his tweets supporting the initial coin offering, or ICO, of fledgling Centra Tech cryptocurrency project that he was a paid endorser, not a fan.
Unfortunately for Mayweather and music producer DJ Khaled, who was sued alongside the 15-time world champion, Centra Tech was a scam whose founder got eight years in prison for scamming investors out of $25 million.
While neither Mayweather nor Khaled was any party to the scam, both got a lot of negative publicity in the crypto world.
Now it seems Floyd is back at the center of another crypto controversy in which a token, at best, crashed and burned. The lawsuit alleges that the price of EMAX spiked for about a week in late May after a press release announced that EMAX was “now the exclusive CryptoCurrency accepted for online ticket purchasing for the highly anticipated Floyd Mayweather vs. Logan Paul Pay-Per-View event” on June 6.
That coincided with tweets by Paul and an Instagram post to her 228 million followers a week later by Kardashian, the suit said. The Kardashian post shown in the lawsuit has #AD as the last of seven hashtags that include #EMAX and #DISRUPTHISTORY. A study by data intelligence firm Morning Consult said “a striking 19 percent of respondents who said they heard about the post invested in Ethereum Max as a result,” Roll Call reported in October.
The newly launched cryptocurrency spiked, hitting a transaction volume of $112.9 million on May 29, according to CoinMarketCap — up from $2.8 million on May 26 — and crashed, dropping back to less than $ 2.4 million on June 26. On Jan.10, trade volume was below $63,000. (It’s worth noting that like many newly launched cryptocurrencies, the per-token price of EMAX was minute, rising to six zeros after the decimal point — $0.0000007 — before dropping to the current seven-zeros number, $0.000000019. There were initially 2 quadrillion of them.)
In the suit, which is seeking class-action status, the plaintiffs accuse the celebrities of “collaborating” with the executives to “misleadingly promote and sell the digital asset associated with EthereumMax.” And, the suit adds, the company’s founders and executives sold off their own EMAX while the price was soaring.
An Ongoing Issue
Mayweather and Khaled are not the only celebrity crypto endorsers who got their knuckles rapped by the U.S. Securities and Exchange Commission for failing to reveal they were paid. In February 2020, actor Steven Seagal paid a $157,000 fine for social media posts supporting Bitcoiin2Gen, and the September, Rapper TI paid $75,000 in connection with the FLiK token ICO.
The SEC first jumped on the issue in November 2017, when it issued a statement urging caution around celebrity backed ICOs urging “investors to research potential investments rather than rely on paid endorsements from artists, sports figures, or other icons.”
Plenty of other celebrities have endorsed cryptocurrencies and businesses like exchanges. William Shatner has done a few, but he’s also legitimately interested in the industry, getting into Twitter fights in insider industry issues like whether Craig Wright is Bitcoin creator Satoshi Nakamoto (Shatner was on the “no” side, and defending Ethereum creator Vitalik Buterin.
More recently there’s legendary NFL quarterback Tom Brady and his supermodel wife, Gisele Bündchen, taking a stake in cryptocurrency exchange FTX — whose founder just testified before the Senate as an industry expert. And then there’s Tesla Founder Elon Musk, whose Dogecoin pumping effectively turned the created-as-a-joke memecoin into a big cryptocurrency.
And Mayweather? Well, if he did endorse Centra Tech, he may yet be facing the referee again regardless of whether he made clear he was a paid endorser, or if it was or wasn’t a legitimate ICO.
Floyd’s Nov. 28, 2019, settlement with the SEC required him to agree “not to promote any securities, digital or otherwise, for three years,” the agency said less than three years ago.