Social media influencers and celebrities have the power to wield public opinions. They can compel consumers to buy products they never knew they needed. Similarly, they can use their clout to influence investment decisions.
So, it’s only natural that when a celebrity with millions of followers endorses a new cryptocurrency, it’ll grab their audience’s attention. The new token will attract plenty of investors, and likely experience a rise in value.
But what happens when investors start losing their money after the initial excitement fizzles out? They can mull over their losses and resolve to never fall prey to another crypto scam. Or they can hold these celebrities accountable, and get professional help to recover money from a cryptocurrency scam.
And that’s precisely what Ryan Huegerich, a resident of New York, wants to accomplish with his class-action lawsuit against socialite Kim Kardashian, boxer Floyd Mayweather Jr., and NBA All-Star Paul Pierce.
Filed in the U.S. District Court for the Central District of California, the lawsuit accuses Kardashian, Mayweather, Pierce, and other celebrities of artificially inflating the price of EthereumMax, a little-known cryptocurrency token.
So, how did one of Instagram’s most popular celebrities find herself entangled in the web of pump-and-dump cryptocurrency scams? Let’s find out.
How the EthereumMax Scam Unfolded
In June 2021, Kardashian took to her Instagram profile to promote EthereumMax. She uploaded an Instagram story about the new digital token that she’d come to know about from her friends. Also, it included a link that urged her followers to “join the E-MAX community”.
While the story included the hashtag “#ad”, it quickly caused a buzz among Kardashian’s 228 million followers at the time.
Kardashian’s earnings from the paid promotion would’ve been in the range of $500,000 to $1 million.
Her Instagram story was followed by other celebrities endorsing EthereumMax too. These included Floyd Mayweather Jr., who accepted the token as payment for his boxing match with YouTuber Logan Paul.
Mayweather even tried to promote EthereumMax at the Bitcoin 2021 Conference in Miami but was booed off the stage. Then there was Paul Pierce who used his Twitter profile to promote the new cryptocurrency.
The combination of these promotions skyrocketed the price of EthereumMax tokens to $0.0000008546 at the start of June 2021. But over the last few months, the cryptocurrency has lost nearly 97% of its value.
As of this writing, EthereumMax tokens are worth $0.0000001904 only.
The drastic drop in the value of these tokens quickly led investors to speculate that they’d walked into the trap of a pump and dump scam.
The celebrities used their popularity and reach to create a buzz about EthereumMax. It compelled their fans to invest in the token, thus amplifying its value.
The company co-founders and celebrities found the right opportunity to cash out their earnings. But as they sold their tokens, it caused the value of EthereumMax to spiral south. That, in turn, led many investors, like Huegerich, to lose their hard-earned money.
Why Did the Scam Work?
To begin with, the celebrities who were promoting the token had a ton of followers on social media. It’s important to understand that social media users often put influencers on a pedestal, and turn to them for advice.
That makes them susceptible to blindly trusting any recommendations made by their favorite influencers. So, when Kim Kardashian shares the news about a new cryptocurrency, it’s natural that her followers will feel compelled to check it out.
Also, it’s worth noting that the name of the token made it look deceptively similar to Ether, the world’s second-largest cryptocurrency. It could’ve led investors to easily trust the new token.
How You Can Avoid Pump and Dump Scams
While details of the EthereumMax scam are still emerging, it’s worth mentioning that the digital token was laden with multiple red flags.
To begin with, the EthereumMax project doesn’t have a well-defined whitepaper. Not much is known about the developers of the project either.
As a ground rule, it’s safer to invest in established cryptocurrencies, such as Bitcoin and Ether. Even if you’re planning to invest in a new digital token, make sure you dig deeper for its whitepaper and founders. Steer clear of currencies that don’t provide these details.
Also, tread with caution whenever you find a celebrity randomly promoting a new digital token. If it’s uncharacteristic of them to endorse cryptocurrencies, consider it as a major red flag.
Closing Thoughts
Crypto-related crimes have reached an all-time high, with criminals raking in $14 billion in 2021. Pump and dump scams are some of the most common forms of cryptocurrency scams that capitalize on the clout of established influencers.
The next time you find your favorite celebrity endorsing a new digital token, research the cryptocurrency to evaluate its credibility and legitimacy. Unless crypto trading is part of the celebrity’s field of expertise, take all their recommendations with a pinch of salt.
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