Federal judge dismisses lawsuit against Kim Kardashian and other celebrity crypto endorsers

Yahoo Finance's Alexis Keenan discusses a federal judge tossing out an investor lawsuit over the ethereum max token.

Video transcript

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AKIKO FUJITA: Well, a federal judge has thrown out a lawsuit accusing celebrities, including Kim Kardashian, Floyd Mayweather Jr, and former basketball pro Paul Pierce, of allegedly misleading fans over their role in promoting a cryptocurrency. Yahoo Finance's Alexis Keenan has the details. And Alexis, of course, when this announcement first came down from the SEC, there was a lot of attention. Maybe because it involved a Kardashian. What's the latest?

ALEXIS KEENAN: [CHUCKLES] Yeah. So this is involving the same digital token that collapsed in a matter of a couple of months called Ethereum Max. Now, it's not related to the traditional Ethereum token, ETH or ETC. It's completely different, just shares the same name.

So here's what happened. There was this federal class action-- that purported class action that investors who bought this coin-- they wanted to file in California but the judge has tossed it out at least for now. The defendants say they lost money because they relied on celebrity endorsements that were posted on social media by Kardashian and some of those others that you named.

I think we have a couple of them that we can show you there. The first post that came from Kardashian was on May 30 of 2021, promoting EMax. And then a second post on June 14 of last year. So just that small short period of time there this token went from having value to having nothing at all. Pretty much worthless.

So the plaintiffs that characterize this token as a pump-and-dump scheme, they said that's why they think they should be able to sue these celebrities, as well as Ethereum's founders. But the federal district court judge in California, he said that the plaintiffs failed to make their case on a number of reasons.

But look, it's not over. The judge is going to let these plaintiffs refile on certain claims that have to do with consumer protection statutes and racketeering as well. There are some of the cases that the judge is going to let them try to make.

The judge did note, though, that there are valid concerns that are raised by the lawsuit. He said, that the tokens-- he kind of equivocated them to snake oil, saying that anyone with the technical skills and/or connections can go ahead and just mint a new currency and create a digital market overnight. So he said, absolutely, there are concerns.

And to your point that you mentioned, Kardashian has already settled with the SEC for $1.26 million in October over promoting this same token. She's also agreed not to promote these tokens for a period of three years from that settlement. Akiko.

RACHELLE AKUFFO: Right, I'll take it from there. Expensive lessons learned, indeed. Thank you so much, Alexis Kennan there, keeping us updated.