The Securities and Exchange Commission (SEC) announced a fine and settlement with Kim Kardashian this week.
This comes after the allegation that she had failed to disclose earnings from her promotion of the EMAX token.
The settlement resolves her legal dispute with the government, but it could complicate a class action lawsuit seeking damages from Kardashian, other famous endorsers, and EthereumMax executives.
Ryan Huegrich filed a lawsuit in January of this year on behalf of all investors who bought EMAX tokens between May 14 and June 17, 2021, alleging that executives and promoters made false or deceptive claims in social media posts and other advertising.
Boxer Floyd Mayweather Jr., former NBA player Paul Pierce, and Kim Kardashian are some of the promoters who have submitted motions to have the charges against them dismissed.
According to the complaint, EthereumMax executives are accused of using celebrities to “dupe potential investors into trusting the financial opportunities available with EMAX Tokens.”
Huegrich claims executives pumped the price of the token with these celebrity endorsements to sell their own holdings at a profit.
In her $1.26 million settlement with the SEC, Kardashian did not admit guilt or deny wrongdoing, which is customary in legal agreements.
Therefore, the allegations cannot be used as unambiguous proof of wrongdoing in the class action lawsuit.
Curtis Miner, a litigation lawyer at the firm Colson Hicks Eidson who defended musician and record producer DJ Khaled in a class action lawsuit over an initial coin offering for CentraTech, believes that it could undermine efforts to have the case against Kardashian and her co-defendants dismissed.
Curtis Miner said,
“If a government agency sued her and she settled, it immediately lends credence to the plaintiff’s claims.”
Although they declined to speak about the case on the record, other attorneys concurred.
The Federal Trade Commission, which establishes regulations governing truth and transparency in advertising, published advice for social media influencers in 2019 asking them to disclose any payments they receive in their postings.