Kim Kardashian will pay $1.26 million to resolve SEC charges that she promoted cryptocurrency illegally.
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According to the Securities and Exchange Commission, Kim Kardashian agreed to pay $1.26 million to settle accusations that she promoted a crypto asset security without reporting the cash she got for the marketing.
According to the agreement, Kardashian committed to not advertise any crypto asset securities for three years without "admitting or rejecting the SEC's findings."
Kardashian failed to disclose that she was paid $250,000 to make a post on her Instagram account touting EMAX tokens, the crypto asset security issued by EthereumMax, according to the SEC's decision. Kardashian's tweet included a link to the EthereumMax website, where interested investors may acquire EMAX coins.
Kardashian, a reality-TV personality and influencer, has one of the most-followed Instagram profiles, with 301 million followers.
"This case serves as a reminder that just because celebrities or influencers support investment options, including crypto asset securities, that doesn't guarantee those investment products are suited for all investors," said SEC chairman Gary Gensler in a statement. "The case of Ms. Kardashian also serves as a warning to celebrities and others that the law compels them to declare to the public when and how much they are paid to advocate investment in securities."
"Ms. Kardashian is delighted to have addressed this matter with the SEC," an attorney for Kardashian stated in a statement sent to Variety. Kardashian has fully cooperated with the SEC since the beginning, and she continues to be eager to do anything she can to help the SEC in this case. She wanted to put this situation behind her in order to avoid a long legal battle. The arrangement she negotiated with the SEC permits her to do so, allowing her to continue with her numerous business ventures."
Kardashian said in an Instagram Story (which disappears after 24 hours) in June 2021, "Are you guys into crypto???? This is not financial advice, but rather a summary of what my friends have recently informed me regarding the Ethereum Max token! Ethereum Max burnt 400 trillion tokens a few minutes ago — over half of their admin wallet — to give back to the whole e-max community. Swipe up to become a member of the e-max community." Kardashian used the hashtag "#AD" in her Instagram photo, but this clearly did not meet the SEC's disclosure standards.
According to the SEC's ruling, Kardashian violated the anti-touting clause of federal securities laws. Kardashian's $1.26 million agreed payment comprises about $260,000 in disgorgement (representing her promotional money plus prejudgment interest) and a $1 million penalty. The SEC stated that the inquiry was ongoing.
Consumers have already been cautioned by the banking authority about "possibly illegal celebrity-backed crypto asset sales."
The Securities and Exchange Commission (SEC) stated in a 2017 warning that celebrity endorsements "may be illegal if they do not disclose the type, source, and amount of any money made, directly or indirectly, by the corporation in exchange for the endorsement." The agency advised investors to "be aware of investment possibilities that appear to be too good to be true." We advise investors to conduct their own research rather than rely on compensated endorsements from musicians, sports celebrities, or other symbols."