Yeah, I don't like the trend of eye-catching false advertisements either. In a way, this resembles those infomercials that give you a bunch of random stuff along with the core product and then claim that it's a $500 value that you're getting for free!
I would think that they'd want to attract those coders who are not directly interested in cash prizes because anyone with half a brain could tell that the prizes do not match the original $40k advertisement. If you're advertising to a bunch of smart developers, don't treat them like idiots who buy into infomercial style advertising scams. These guys should reconsider spinning the contest as a fun & challenging way to top the leaderboard, and the prizes are just a small token of appreciation for attending the contest.