A new ruling in a case brought by investors in a now-worthless crypto token is a warning to celebrities and social media influencers like reality star Kim Kardashian: If you’re paid to hype a dicey investment to your followers, you may be liable when they take your advice.
investors’ claims that neither of her two Instagram posts about the tokens was false or misleading and that plaintiffs could not show they lost money as a result of her posts.
Fitzgerald cautioned that plaintiffs' lawyers from Scott+Scott will eventually have to explain exactly how each defendant’s allegedly deceptive promotion affected EMax values. That may prove to be “quite difficult,” he said. But at this preliminary stage of the case, the judge concluded, Scott+Scott can move ahead based on its theory that the market for the tokens was distorted by celebrity endorsements.
Broadly speaking, the lawsuit alleges that EMax tokens were a "pump-and-dump" scheme in which insiders used celebrity endorsements to drive up prices before leading a stampede to sell the tokens. EMax prices, according to the complaint, never recovered from the sell-off. The company denies any violation of state consumer and securities laws.Scott+Scott did not assert securities claims against Kardashian, Pierce and Mayweather.
The new ruling, Masson said, should serve as a blueprint for crypto investors who contend they were duped by celebrity promoters. After Fitzgerald tossed plaintiffs' previous complaint for failing to establish that investors relied on the celebrities’ allegedly deceptive statements, he said, Scott+Scott went back to the name plaintiffs to document how endorsements affected their investment decisions.
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