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This week, Kim Kardashian was fined $1.26 million by regulators for promoting a cryptocurrency in the wrong way. This raises a lot of questions, but the biggest one is: what the heck is EthereumMax (EMAX), the token she promoted?

Even though it starts with "Ethereum," it is not the second-largest cryptocurrency. Instead, it is a token built on top of Ethereum. Like many other cryptocurrencies, it makes big claims about how it will change the future of finance. It shouts this vision to the world with flashy ads and stencils painted on the sidewalk that beg people to join.

The Securities and Exchange Commission (SEC) said Monday that investors could "reasonably expect" to make money if they read about EthereumMax's big plans to sign deals that "drive value" into EMAX or heard its promoters say that prices would go up. So, EMAX is a type of security.

Even though the SEC doesn't have a job to do with crypto, its top leaders think that the vast majority of digital assets are securities like stocks or bonds that they can regulate. If the SEC says a crypto project or its promoters are scams, the requirements for them go up a lot, but the SEC rarely takes action.

Kim Kardashian pumps EMAX

"The SEC can choose from a wide range of tokens that they think are securities, but only one has anything to do with Kim Kardashian," said Nelson Rosario, an attorney whose practice is focused on cryptocurrencies. "You can show her what not to do. You reach a lot of people, so it's a good way to spend your money."
Kim Kardashian Fined $1.26 Mil For Promoting Crypto! | Tech ARP
Kardashian was fined by the SEC on Monday because she promoted EMAX to her 225 million Instagram followers in June 2021 without saying she was paid $250,000. At the time, one British financial regulator thought it was one of the biggest financial deals ever. But it was also for security, which makes it a crime.

The people behind EMAX have never registered with the SEC, so there is no proof that they think their token is a security. When CoinDesk asked EthereumMax for a comment, no one from the company got back to us.

EthereumMax token

In its whitepaper, EthereumMax says it wants to build a "robust and scalable ecosystem that fully maximizes the power of decentralized finance." The project's self-reported history goes back to COVID-19 lockdowns. After that, its creators, who were "hardcore crypto believers," started to "deeply focus" on making a token that could soar.

The result is EMAX, a token that is supposed to be good for culture. The whitepaper said that people who own EMAX get "special access" to "the hottest restaurants and clubs." The official currency of EthereumMax's growing realm is the "culture token." Its creators talk about EthereumMax-linked exchanges, non-fungible token (NFT) marketplaces, and other places where holders can get something of value. Those haven't started yet.

A CoinDesk reporter looked on the EMAX website for information on how to get these supposed cultural benefits with the 1 billion EMAX tokens they bought for $5 on Monday, but was unable to find it.

With 1 billion tokens, people who own EMAX can play a number of chance-based casino games on the EthereumMax website. The games don't give out crypto tokens, but rather more game credits. The best users could win trillions of EMAX tokens, and the third-best user would get a t-shirt.

The website's store advertised a "EthereumMax dad hat" that could be bought for $25.95 USD. There was no way to pay with EMAX.

In the meantime, EthereumMax's "burn-baby-burn" tokenomics cut the number of EMAX tokens in circulation "to make them more scarce" for a token whose supply started at 2 quadrillion. In her ad, Kim Kardashian said that the EMAX founders' decision to burn 400 trillion tokens was "giving back to the whole EMAX community."

Serhii Zhdanov, CEO of the London-based crypto exchange EXMO, said that deflationary tokenomics are often used by crypto projects to drive up the price of their assets. The reasoning is simple: by taking assets out of circulation, they can raise the value of the ones they still have.

Zhdanov said, "It's like a buyback of stocks on the traditional stock market." But they burn the tokens instead of buying them on the open market. He said that the price will go up as long as the demand for the token stays the same.

But things haven't gone so well since Kardashian's post. Since then, EMAX has dropped by 97%.

One big change to the token is that in February, it moved from Ethereum to Arbitrum, a fast and cheap scaling solution that backers of EthereumMax say is better for the ecosystem. Nansen data shows that about 31% of all tokens in circulation have moved to Arbitrum. The people who own them can't do much with them yet.

The community behind EMAX

Almost every cryptocurrency project talks up the "community" of investors who think that this token or that NFT will change the world in some way. EthereumMax is the same, even though its website says it will "disrupt history." It keeps its most accessible community (about 30,000 Twitter followers) interested by sending them streams of educational and partnership content.

If EthereumMax's Twitter is for broadcasting to the world, then its Discord server is where the project's true believers (or at least the most dedicated ones) hang out. There, about 2,300 investors can talk with each other about EthereumMax's crypto partnerships, its moves into gaming, its price action, or just about anything else.

Well, almost nothing. On February 27, a user questioned the "credibility" of EMAX, a token he'd bought long before the Kardashian ad and kept "through ups and downs."

A user named Donwonfosho said, "I didn't buy this coin because Kim Kardashian said it was cool." He said this after complaining that he would have to pay even more money to move his tokens from Ethereum to Arbitrum, where holding EMAX had only caused him trouble.

"Always doing something. Oh, the newest and best. "Invest more, invest more," Donwonfosho said in the chat, which made the moderator of the Discord server muzzle the account.

"That's the answer," Donwonfosho told CoinDesk, "if anyone ever brings up a concern."

A well-known crypto Discord community manager who has worked with several high-profile Ethereum NFT groups told CoinDesk that the idea behind "crypto communities" is to bring together a group of people who care about the same thing.

"There are a lot of people in the space who use the word 'community' to rally support for pump-and-dump schemes when, in reality, there's nothing there but speculation," said the manager, who spoke openly on the condition that he or she not be named.

The manager said that it's not unusual for crypto Discord members to make "hyperbolic" accusations when bad news is happening, like when prices are falling. But the manager said it wasn't a good idea to shut down these people's voices just because they voiced complaints.

After the SEC took action against Kardashian, EthereumMax's community was optimistic. One Discord user pointed out that the SEC only said that EMAX was a security, not a scam. (The SEC has said that Kardashian is helping with its "ongoing investigation" of EMAX.)

Most people in EMAX's Telegram group seemed to agree that more attention from the media would be good for the cryptocurrency. Even so, user Deebo said, "It was a bummer" that many articles called EMAX a "scam token," when in reality the coin is waiting to release things until the market is better.

Even so, EMAX went up by more than 40% after the SEC took action. More than $63,000 worth of tokens changed hands, which is the most in a single day since March.

In response to a question, moderator Tony Stark said, "Yes, we've had a good pump today thanks to the SEC and their free advertising." "Lots of big buys, and a lot of new investors giving the SEC the middle finger."