OPINION: This article may contain commentary which reflects the author's opinion.
Kim Kardashian got hit with a major punishment after being charged with violating securities law.
The reality television star agreed to pay a $1,26 million fine to the Securities and Exchange Commission as a settlement after she promoted EthereumMax, a crypto asset, on Instagram but did not disclose that she was being paid $250,000 to do so, CNN reported.
She also agreed to not promote another cryptocurrency for three years and to cooperate with the SEC’s ongoing investigation.
“This case is a reminder that, when celebrities or influencers endorse investment opportunities, including crypto-asset securities, it doesn’t mean that those investment products are right for all investors,” SEC Chair Gary Gensler said. “We encourage investors to consider an investment’s potential risks and opportunities in light of their own financial goals.”
Today @SECGov, we charged Kim Kardashian for unlawfully touting a crypto security.
This case is a reminder that, when celebrities / influencers endorse investment opps, including crypto asset securities, it doesn’t mean those investment products are right for all investors.
— Gary Gensler (@GaryGensler) October 3, 2022
“Ms. Kardashian is pleased to have resolved this matter with the SEC,” Kardashian’s attorneys said. “Kardashian fully cooperated with the SEC from the very beginning and she remains willing to do whatever she can to assist the SEC in this matter. She wanted to get this matter behind her to avoid a protracted dispute. The agreement she reached with the SEC allows her to do that so that she can move forward with her many different business pursuits.”
Cornell Law School professor Charles Whitehead said it was a “shot across the bow” for celebrities who want to endorse cryptocurrency.
“It’s a way to signal to other influencers: if you’re thinking about dealing with crypto, think twice,” he said. “The SEC is also using her as an influencer – but to boost compliance with securities laws. [It’s a] smart way to bring attention to the matter so others won’t do it.”
Kardashian’s ad came in June 2021 where she did use the hashtag #ad so fans were aware that her post was an advertisement.
“Are you guys into crypto? This is not financial advice but sharing what my friends told me about the Ethereum max token!” she said.
“If you’re advertising perfume, or you’re advertising vacation homes or anything else on the internet, there are various laws related to that. But these are the securities laws,” the SEC chair said on CNN.
“The federal securities laws are clear that any celebrity or other individual who promotes a crypto asset security must disclose the nature, source, and amount of compensation they received in exchange for the promotion,” the SEC’s Division of Enforcement Director Gurbir S. Grewal said. “Investors are entitled to know whether the publicity of a security is unbiased, and Ms. Kardashian failed to disclose this information.”
“The Securities and Exchange Commission today announced charges against Kim Kardashian for touting on social media a crypto asset security offered and sold by EthereumMax without disclosing the payment she received for the promotion. Kardashian agreed to settle the charges, pay $1.26 million in penalties, disgorgement, and interest, and cooperate with the Commission’s ongoing investigation,” the SEC said in a press release.
“The SEC’s order finds that Kardashian failed to disclose that she was paid $250,000 to publish a post on her Instagram account about EMAX tokens, the crypto asset security being offered by EthereumMax. Kardashian’s post contained a link to the EthereumMax website, which provided instructions for potential investors to purchase EMAX tokens,” it said.
But Kardashian is not the first celebrity crypto endorser to have to pay fines.
“In 2018 boxer Floyd Mayweather Jr. and music producer DJ Khaled each paid fines for pushing cryptos. Mayweather, who had been compensated $300,000, paid a bit more than $600,000 in penalties, while Khaled, who had been paid $50,000, was hit with penalties topping $150,000. In addition actor Steven Segal paid more than $300,000 in penalties for doing the same thing in 2020,” CNN said.