June 2021 was a heck of a time for speculative coins and tokens. This was the era when the crypto industry’s global market capitalization surpassed $2 trillion for the first time. Investors couldn’t get enough of the sub-one-cent tokens that developers were minting left and right. One could throw small sums of money at a dozen projects at a time; if even one replicated the thousand percent gains some of the top meme coins were turning out, it made for a nice payday.
So, when Kim Kardashian posted an Instagram story advertising EthereumMax, there were tens of thousands of investors who eagerly sprang at the chance to get into the “next big thing” as soon as possible. Kardashian, alongside pro boxer Floyd Mayweather and NBA player Paul Pierce, were paid by EthereumMax to continue pumping the crypto’s price which, by the time Kardashian posted her ad, had already grown by 23,000%. Unfortunately, though, the gravy train could not continue. In fact, it would harm many of the investors she had helped to bring in.
Today, EMAX prices are nowhere near their all-time high. If one had bought any of the crypto around the time of Kim Kardashian’s ads, or the promotion by her celebrity peers, their investment is now essentially worthless. And the plummet isn’t just getting her in hot water with investors, it’s also mobilizing the SEC.
A class-action lawsuit filed against Kardashian and Mayweather alleges that the pair had used their celebrity to artificially inflate the price of the EMAX crypto. The suit accuses the two of shilling a scam token. The accusations prompted a full SEC investigation into the project and the pair’s involvement as a result. The SEC’s investigation is focusing primarily on disclosures related to the promotions. It argues that neither celebrity properly disclosed that the advertisements were in fact advertisements. Moreover, neither person had properly disclosed how much they had earned through the ads.
Earlier this week, Kardashian made an exit from this investigation, choosing to pay a $1.3 million fine to the SEC. The fine punishes Kardashian with failing to disclose the $250,000 she was paid by EthereumMax developers to promote the crypto. The fee is largely negligible compared to her $1.8 billion estimated net worth and absolves Kardashian from the investigation. However, she has not pled innocence or guilt regarding the charges.
Kardashian is, in an odd way, a sort of meme coin martyr, thanks to her involvement with the EMAX crypto. The news has taken off in the last week due to her massive celebrity status. And, it could bring an end to the celebrity pump-and-dump formula which has allowed meme coins to thrive recently.
Kim Kardashian and Floyd Mayweather are far from the first celebrities to pump a meme coin. Though, they are likely the most reputable. Barstool Sports founder Dave Portnoy is another investor facing a lawsuit from investors, thanks to his own endorsements of meme coin SafeMoon (SFM-USD). Another lawsuit filed by SafeMoon investors from earlier this year targets other celebrities who pumped SFM, including internet influencer Jake Paul, musician Soulja Boy and others.
These lawsuits have marked the beginning of the end for the formulaic meme coin pump-and-dump. The Kim Kardashian news could very well put the final nail in that coffin. The SEC put out a video in the wake of its fine, and chairman Gary Gensler has shown that his agency is taking notice of the trend. With celebrities being put on notice, and with one of the largest influencers in the world unable to escape the SEC’s wrath, meme coins as we know it could be an endangered species.
Market conditions are already unkind for crypto. With inflation on the rise and rates rising once again, speculative investing isn’t the cash cow that it was during the worst days of the Covid-19 pandemic. These macroeconomic factors are already weighing against developers who want their quick buck. And while celebrity endorsements have been one of the easiest and most effective ways to shill these coins, the SEC scaring away these promos could ensure that they don’t come back, even when prices pick back up.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Brenden Rearick is a Financial News Writer for InvestorPlace’s Today’s Market team. He mainly covers digital assets and tech stocks, with a focus on crypto regulation and DeFi.
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