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Kim Kardashian, EthereumMax, and the inevitable pump and dump lawsuit

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Kim Kardashian has monetized her image, along with anything and everything else willing to pay her for her likeness and association, to the tune of over $1 billion.

From reality TV, to luxury clothing, makeup and even a sex tape of herself, Kardashian has shown there is virtually nothing she isn’t prepared to profit from, and that includes cryptocurrency. Unfortunately for her, however, cryptocurrency could prove a losing proposition — and one that should serve as a major red flag for investors.

EthereumMax Kim KardashianKardashian, boxer Floyd Mayweather Jr., former professional basketball player Paul Pierce and several EthereumMax executives, find themselves at the center of a lawsuit over their decision to tout nascent cryptocurrency EthereumMax as part of what is believed to have been a “pump and dump” effort to artificially inflate the value of the tokens.

In the case of Kardashian, during the week of June 15, 2021 she took to social media asking if her followers were into crypto and calling their attention to EhtereumMax cryptocurrency tokens as a new option —a tweet that nearly tripled the volume of EthereumMax changing hands and sent the token’s value soaring up more than 1,300% within a month.

Around the same time, Pierce also took to Twitter to praise EthereumMax as a money maker for investors, while Mayweather accepted the tokens as payment for a boxing match between him and YouTube personality Logan Paul. Meanwhile, the three of them, along with executives at EthereumMax, used the window to unload their own tokens and turn a handsome profit.

So are regulators and investors getting angry?

Social media influencers promoting individual products is nothing new, but the trio’s hype and the resulting boost in the tokens’ value was short lived, leading to massive losses for investors and attracting the ire of investors and regulators alike. As a result, a class action suit has been filed against the group over losses experienced by investors who bought into the hype and purchased EthereumMax tokens during the period between May 14, 2021 and June 17, 2021, alleging that they made false or misleading statements.

Since that period, EthereumMax tokens, which have nothing to do with the cryptocurrency Ethereum, have plummeted in value by 97%. The group’s activities have also drawn the attention of Charles Randell, the head of Britain’s Financial Conduct Authority, who has suggested that Kardashian’s tweet represents the single largest financial promotion to date.

“They offered misleading information about the coin, and investors are now claiming damages and suing them for it,” said Jonathan Svensson, co-founder of financial education website Almvest. “What traders should take away from this is that there will be more pump n’ dump scams surrounding cryptocurrency. With successful coins making investors a lot of money, there will be more people who want to cash in on the new market.”

While it remains to be seen if Kardashian, Mayweather, Pierce and EthereumMax executives will be held accountable for hyping the cryptocurrency, the case is a wakeup call for investors regarding the importance of due diligence before purchasing crypto tokens. Though cryptocurrencies such as Bitcoin have seen their values continue on an upward trajectory, with a single token worth $41,934.60 as of January 19, 2022, the market continues to be flooded with new cryptocurrencies, many of which have virtually no value.

And EthereumMax is just one of many cryptocurrencies that has seen its value sent soaring based on nothing but hype. Dogecoin, a cryptocurrency that started out as nothing more than a joke, saw its value rise as high as $0.74 following tweets about the token from high-profile investors such as Elon Musk who, despite the fact that the token’s value had dropped to $0.1636 as of January 19, 2022, recently announced that it can be used to make purchases from Tesla (Nasdaq: TSLA).

“In the days of ‘instant everything,’ investors need to practice the old-school habits of their grandparents,” said Jeremy Britton, CFO of Boston Trading Co., noting that there is a reason famed investor Warren Buffet sticks to tried and true investment metrics instead of buying into hype from media personalities, social influencers and platforms such as TikTok. “In the days before the Internet, it may have taken a few days to find information about a company’s stock or a crypto token. But today we can do it in less than five minutes, so take the time to do a few minutes of due diligence before you invest money that may not come back,” said Britton, whose company issues and manages “Boston Coin,” a cryptocurrency ETF. “The old adage ‘buyer beware’ have been true for millennia.”

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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