Kim Kardashian fined by SEC for crypto advertising

Kardashian is one of several celebrities and social media influencers who have slimmed down on cryptocurrencies during the pandemic, and is far from the first to run afoul of the country’s top financial regulator.

The Securities and Exchange Commission announced Monday that it had reached a settlement with Kardashian over an Instagram post from last year that claimed a crypto token sold by EthereumMax. Kardashian did not disclose that she had been paid $250,000 by EthereumMax for the position, which violates SEC rules.

Kardashian agreed not to participate in any cryptocurrency endorsements for the next three years, pay a $1 million fine for the post and forfeit an additional $260,000 including the $250,000 she earned from creating the ad and about $10,000 in interest payments, according to Monday’s SEC filing.

SEC Chairman Gary Gensler took the opportunity Monday to share one video on Twitter warning social media users to be cautious when making investment decisions based on what products influencers and celebrities are promoting online.

“Celebrity endorsements don’t mean an investment product is right for you, or even frankly that it’s legitimate,” Gensler said.

“A celebrity or influencer’s incentives are not necessarily aligned with yours.”

The ad

In the post in question that has landed Kardashian in hot water with the SEC, the reality TV star noted that it was “not investment advice,” though she failed to disclose that the post was a paid endorsement. Instead, she wrote that her “friends” had recommended EthereumMax’s token to her.

Securities and Exchange Commission

The post was accompanied by a video of Kardashian saying she had a “big announcement,” according to the SEC filing. The post also contained a link that redirected people to the EthereumMax website to purchase EMAX tokens.

Kardashian included an #AD tag at the bottom of the post, though the disclaimer wasn’t enough to satisfy the SEC. According to the archive: “[a]A celebrity or other person promoting a virtual token or coin that is a security must disclose the nature, scope and amount of compensation received in exchange for the promotion.”

Crypto celebrity endorsement

The number of social media influencers and celebrities touting crypto assets has exploded during the pandemic, with companies routinely enlisting the help of highly recognizable public faces, including Kardashian, actor Matt Damon and football star Tom Brady.

But not all endorsements have gone smoothly, and Kardashian isn’t the only celebrity to run afoul of the SEC.

Professional boxer Floyd Mayweather was fined by the SEC in 2018 along with music producer DJ Khaled for failing to disclose how much he was paid to back Centra Tech — a crypto company that had planned to launch a virtual currency debit card — when the company did its initial coin offerings, raise money by launching and selling digital tokens instead of shares.

Last year, Mayweather and team wore EthereumMax-branded clothing to the 2021 Bitcoin conference, which is sponsored by Ethereum’s rival cryptocurrency.

Cryptocurrency investors sued Mayweather and Kardashian in a California court last January over their EthereumMax endorsements, accusing the pair of not disclosing how much they were paid to back crypto assets that prompted “investors to buy these losing investments at high prices.”

In Gensler’s video on Monday, he warned social media users to be wary of any celebrity endorsements and especially those related to cryptocurrency, which he described as “highly speculative assets,” reflecting recent efforts by the SEC to regulate cryptocurrencies closer to protect investors.

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