The judge said the investors adequately alleged the posts were "literally false." He also found that a Kardashian post suggesting that EMAX tokens were scarce was misleading.
Kim Kardashian failed to persuade a judge to throw out a lawsuit in which she's accused of scamming investors in a cryptocurrency called EthereumMax by falsely hyping the digital tokens. Floyd Mayweather Jr. fared better, with the judge finding that his public statements about the growth prospects for the EMAX token were mostly harmless.
But investors who claim they paid "inflated prices" for the blockchain-based digital assets will get a chance to revise and refile their allegations that the ex-boxing champion failed to disclose he was being paid to promote EMAX.
US District Judge Michael Fitzgerald in Los Angeles on Tuesday
rejected arguments by Kardashian's lawyers that he should dismiss false
advertising claims over her social media posts in which she said EMAX tokens
would be accepted at certain night clubs as payment for table
reservations.
The judge said the investors adequately alleged the
posts were "literally false." He also found that a Kardashian post
suggesting that EMAX tokens were scarce was misleading.
Fitzgerald
had dismissed the claims in November, saying "there is just a lot that is
wrong with this case." In Tuesday's 84-page ruling, he noted that lawyers
for the investors "artfully cured" some deficiencies in their previous
version of the complaint, but warned that he's giving them just one more
opportunity to address remaining shortcomings in some claims or they will be
dismissed for good.
In addition to targeting celebrity promoters, investors sued
several EMAX co-founders and consultants.
A lawyer for Kardashian
didn't immediately respond to a request for comment.
Mayweather
can't be sued for stating his "belief" about the future growth of EMAX at a
2021 Bitcoin conference, because that amounts to "quintessential
nonactionable puffery," the judge said.
The US Securities and
Exchange Commission announced in October that Kardashian had agreed to pay
$1.26 million to settle allegations that she broke US rules by touting EMAX
tokens. The SEC said Kardashian didn't disclose that she was paid $250,000
to post on her Instagram account about the tokens.
Kardashian
settled without admitting or denying the SEC allegations. And she agreed to
refrain from touting any additional digital assets for three years.
The
law requires anyone who touts a security, such as a stock or even some types
of cryptocurrencies, to not only say they are getting paid to do so, but
also to disclose the amount, the source, and the nature of those
payments.
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