Reality TV star Kim Kardashian has agreed to pay $1.26 million in settlement over charges pressed by the Securities and Exchange Commission (SEC). The SEC claimed that Kardashian had failed to disclose the payment she received for promoting EthereumMax’s crypto product, the EMAX token, on Instagram in June last year. Kardashian received a $250,000 endorsement fee from the crypto company.
Today we announced charges against Kim Kardashian for promoting a crypto security offered by EthereumMax without disclosing the payment she received for the promotion.— U.S. Securities and Exchange Commission (@SECGov) October 3, 2022
Kardashian agreed to settle the charges, pay $1.26 million, and cooperate with the investigation.
The $1.26 million fine consists of the original endorsement fee, taxes and a $1 million penalty. Kardashian has also agreed to the SEC’s demand not to promote any crypto product in the next three years.
Kardashian’s attorney, Duncan Levin, said that the public figure's “fully cooperated” with the SEC since the start of the case and was pleased with the settlement.
“She wanted to get this matter behind her to avoid a protracted dispute,” Levin added. “The agreement she reached with the SEC allows her to do that so that she can move forward with her many different business pursuits.”
Today @SECGov, we charged Kim Kardashian for unlawfully touting a crypto security.— Gary Gensler (@GaryGensler) October 3, 2022
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.
By agreeing to pay the settlement, Kardashian avoided a more intrusive investigation that may include a document collection and deposition. The case, however, prompted the SEC to warn other celebrities against endorsing securities assets to prevent their social media posts from being considered financial advice.
SEC chief Gary Gensler said that Kardashian violated federal securities laws by not disclosing the amount she received for the promotion. The laws she violated were parts of the Securities Act to protect consumers. He added that Kardashian’s case also served as a warning to investors.
“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.
Earlier this year, Kardashian and several other public figures, including famous boxer Floyd Mayweather Jr., were sued by EthereumMax investors. According to the suit, these celebrities had “artificially” inflated the value of EMAX tokens in their promotional posts.
Once again I offer my fellow celebs free advice when it comes to mistakenly shilling for crypto: blame your agent.— Ben McKenzie (@ben_mckenzie) October 3, 2022
Influencers promoting financial products on social media
CNBC reported that the COVID-19 pandemic had increased the number of Gen Z investors. Social media like YouTube, TikTok and Instagram became popular sources of information for the generation to learn about finance. Bone Fide Wealth chairman Douglas Boneparth said they became aware of investment products thanks to these platforms.
“This used to be a rich person’s game, but now everyone can buy stocks or crypto — but that can also lead toward a dangerous situation if you don’t have knowledge,” Boneparth said. “It’s really buyer beware.”
Despite saying that the development was a “good thing,” Boneparth warned the new investors against going “blindly” when influencers suggest they invest in an asset. He added that careful research on products before investing is important.
Boneparth also said influencers could have their own agenda or potential conflicts of interest when promoting certain assets. Senior analyst Ted Rosman shared a similar opinion with Boneparth, adding that the stakes of investing in assets endorsed on social media were higher.
“Regardless of where we are hearing this advice, we need to remember what works for one person may not be the right advice for you,” Rossman added.