Caryl Anne Francia
October 15, 2022
The Securities and Exchange Commission fined media personality Kim Kardashian for not fully disclosing that she was paid to promote a cryptocurrency asset.
Kim Kardashian paid $1.26 million in fines after failing to disclose a payment she received for promoting the cryptocurrency asset EthereumMax in June 2021.
“ARE YOU INTO CRYPTO???” Kardashian wrote in a now-disappeared Instagram story post, according to CNBC. “THIS IS NOT FINANCIAL ADVICE BUT SHARING WHAT MY FRIENDS JUST TOLD ME ABOUT THE ETHEREUM MAX TOKEN.”
She also included “#ad” in another post that month to promote EthereumMax, according to CNN.
In addition to being fined, she was restricted from promoting cryptocurrency assets for the next three years. She will also cooperate with an ongoing investigation by the SEC.
Kardashian, who is known for starring in reality television shows that feature her family, was paid $250,000 to promote EthereumMax. She was ordered to pay back $260,000, which included the payment she received with interest, and $1 million for the penalty.
Kardashian’s net worth is estimated at $1.8 billion. In comparison to her personal assets, the $1.26 million total fine may barely impact her financially.
SEC Chair Gary Gensler warned other potential investors that celebrity interest is not always aligned with their own.
“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,” Gensler said in a news release.
Michael Rhodes, a lawyer who represents the media personality, said that she is pleased to have resolved the issue. Kardashian has yet to say something publicly about the news herself, neither admitting nor denying the regulator’s findings.
“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,” Rhodes said, as reported by CNBC. “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.”
This fine against a high-profile celebrity like Kardashian sends a loud and clear message from the SEC to similar personalities that the federal agency will not tolerate cryptocurrency endorsements from celebrities without them enclosing their earnings from it. The SEC is leading this effort in order to ensure investors are not being misled.
This cryptocurrency endorsement to her 250 million Instagram followers resulted in artificially inflating the value of the asset.
Her promotion of EthereumMax made investors suffer losses. The token is estimated to have declined 98% since June 13, 2021.
To protect the public interest, Congress passed a series of bills in the 1930s, starting with the Securities Act of 1933. In an interview with CNBC, Gensler brought up the signed law, which states that if someone promotes a security to the public, that person has to disclose that they are being paid.
While the laws predate cryptocurrencies, the SEC applies the law to cryptocurrency securities.
Kardashian was not the only public figure who was warned against this type of cryptocurrency promotion. SEC warned celebrities who were looking to endorse cryptocurrency for money in 2017. It made it clear to these people that they had to disclose their earnings.
Other incidents similar to the Kardashian’s case are those of record producer Khaled Mohammed Khaled, who goes by the name “DJ Khaled,” and boxer Floyd Mayweather Jr.
Khaled was ordered to pay $150,000 in fines in 2018 for not disclosing the $50,000 he received for endorsing the cryptocurrency issuer Centra Tech Inc. Mayweather was also ordered to pay $600,000 for not disclosing the $300,000 he was paid by three issuers.
Due to heightened fears of recession, geopolitical turmoil and rising interest rates causing wild swings in the cryptocurrency market, the regulation of the digital asset market has been at the top of the SEC’s priorities. The SEC will continue to punish individuals who interfere with it.
“We encourage investors to consider an investment’s potential risks and opportunities in light of their own financial goals,” Gensler said in
Basmalla Attia is the Advertising Director for The Ticker.
Caryl Anne Francia is the Business Editor for The Ticker.
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