Kim Kardashian, the reality TV star and businesswoman, has been fined $1 million for promoting a crypto security on Instagram without fully disclosing that she was paid to do so. Kardashian will also have to return the $250,000 with interest, she received for writing a post about EthereumMax tokens. Furthermore, she is barred from promoting any crypto asset securities for three years.
What exactly is the Kim Kardashian case, and what does it reveal about the murky world of cryptocurrency securities? We’ll explain.
Why was Kim Kardashian fined over an Instagram post?
Kardashian has a massive Instagram following, with millions of followers. As of October 4, she had 331 million followers. She had 220 million followers when she posted about cryptocurrency in June of last year.
“Are you guys into crypto????” she had asked, along with a link to the EthereumMax website, where investors could buy EMAX tokens. “Sharing what my friends just told me about the EthereumMax token!” the post continued, and it included the hashtag ‘#ad’ to indicate it was a paid advertisement.
The US Securities and Exchange Commission (SEC) fined her on October 3 for violating a law that requires celebrities to disclose to the public “the nature, source, and amount of compensation” they receive to promote investing in securities.
Kardashian agreed to pay the fine but refused to admit or deny the SEC’s findings
“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.”
Kardashian agreed to pay the fine but refused to admit or deny the SEC’s findings. According to her lawyer, the reality TV star “wanted to get this matter behind her in order 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,” the lawyer added.
Celebrities promoting crypto run the risk of luring investors into schemes they don’t fully understand
Because the crypto world is unregulated and poorly understood, celebrities promoting it runs the risk of luring investors into schemes they don’t fully understand.
In the US, the SEC says about celebrity endorsements: “Persons making these endorsements may also be liable for potential violations of the anti-fraud provisions of the federal securities laws, for participating in an unregistered offer and sale of securities, and for acting as unregistered brokers.”
A New York resident who purchased EMAX tokens and lost money filed the case in January
Kardashian, boxing champion Floyd Mayweather Jr., basketball player Paul Pierce, and EthereumMax have all been sued in a federal court in Los Angeles for promoting crypto tokens.
According to the lawsuit, celebrity endorsements caused the currency’s value to rise to more than 1,300% of its initial value before falling to a “all-time low” around a month after Kardashian’s post, according to a BBC report. A New York resident who purchased EMAX tokens and lost money filed the case in January.
