The Securities and Exchange Commission (SEC) has charged television celebrity Kim Kardashian for touting a crypto asset security on social media.
The product was offered and sold by a company called EthereumMax, and Kardashian did not disclose the payment she received for promoting it.
She agreed to settle the charges and pay $1.26m (£1.12m, €1.28m) in penalties, disgorgement and interest, and cooperated with the SEC’s investigation.
The regulator discovered that Kardashian failed to disclose she was paid $250,000 to publish a post on her Instagram account about EMAX tokens, the crypto asset security offered by EthereumMax. Her post also contained a link to the company’s website, which provided instructions on how to purchase the product.
The SEC’s order found that Kardashian breached anti-touting provisions under the federal securities laws. She, however, did not admit nor deny any wrongdoings.
Not one-size-fits-all
“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,” said SEC chair Gary Gensler. “We encourage investors to consider an investment’s potential risks and opportunities in light of their own financial goals.
“Ms. Kardashian’s case also serves as a reminder to celebrities and others that the law requires them to disclose to the public when and how much they are paid to promote investing in securities.”
Gurbir Grewal, director of the SEC’s division of enforcement, added: “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.
“Investors are entitled to know whether the publicity of a security is unbiased, and Ms. Kardashian failed to disclose this information.”
‘Stark warning’
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: ’The $1.26m fine levied on Kim Kardashian for promoting Ethereum Max is a stark warning to other celebrities not to dabble in the dark world of crypto to make a quick buck.
“She was paid $250,000 to advertise the crypto currency, but didn’t disclose to her followers she had received money to do so. This is a severe dressing down both financially and in terms of reputation for the Queen of reality TV who has agreed not to promote any crypto asset securities for three years.
“Her post also provoked ire from Britain’s financial watchdog, the Financial Conduct Authority. Outgoing chair Charles Randell warning last year that it may have been the financial promotion with the single biggest audience reach in history, given the huge size of Ms Kardashian’s following, which currently stands at 330 million.
“Regulators are clearly horrified at the damage superstar celebrities can do to the bank balances of vulnerable consumers, who are influenced by almost every move they make. The delusions of quick riches can spread far too rapidly on social media with speculation amplified by reposts by millions of followers.”
