Kim Kardashian Fined For Cryptocurrency Marketing, Here’s What It Means For Crypto

Important takeaways

• Kim Kardashian will pay a $1.26 million fine for not disclosing to her Instagram followers that she was financially compensated for promoting EthereumMax.
• This could be a sign that the SEC will introduce additional rules for the cryptocurrency space.
• The SEC published a video urging the public to think twice before taking investment advice from celebrities and influencers.

In rather surprising news, Kim Kardashian was fined by the SEC for her alleged involvement in a cryptocurrency “pump and dump” scheme because she failed to disclose that she was financially compensated for the ad. The news was unexpected because many celebrities and athletes have been eager to promote new coins in the market in recent years.

Celebrity crypto endorsements have come from the likes of Matt Damon, Tom Brady and Gwenyth Paltrow, to name a few. They have promoted everything from cryptocurrency exchanges to NFT projects and even risky new coins emerging. Elon Musk regularly promoted Dogecoin all over social media as he became closely associated with the meme coin, although many skeptics were quick to point out that the crypto started as a parody.

The SEC published a video this morning, October 3, along with a press release informing the public that Kim Kardashian had been fined for not disclosing that she received financial compensation for promoting EthereumMax. They emphasized that we should all think twice before buying into celebrity investment opportunities.

What happened to Kim Kardashian and The Crypto Scheme?

In June 2021, Kim Kardashian took to Instagram to promote a new cryptocurrency coin to around 250 million followers. The coin was EthereumMax, and the post used the hashtag “#ad,” but Kardashian suggested her friends had informed her about the coin rather than mentioning her alleged ties to the company in the form of a $250,000 payment for the post. There is a big difference between promoting something you believe in and getting paid to promote an investment opportunity.

The agency announced on the morning of Oct. 3 through a tweet by SEC Chairman Gary Gensler and a press release that Kim Kardashian had accepted the fine. Kardashian did not comment on the regulator’s findings.

The official SEC press release wrote the following about Kim Kardashian and EthereumMax:

“Kardashian agreed to settle the charges, pay $1.26 million in fines, penalties and interest, and cooperate with the Commission’s ongoing investigation.

The $1.26 million figure includes a $1 million penalty along with $260,000, which covers the $250,000 she was paid for the promotion and interest. She will also cooperate with the ongoing investigation while agreeing not to market any crypto assets for three years. This story has received a lot of media attention as it could lead to further problems for other celebrities who have promoted crypto in the past or want to promote it in the future. There could potentially be more lawsuits and legal issues as the cryptocurrency loses billions of dollars.

Why was this crypto campaign such a problem?

One might wonder if the problem was the actual value of the cryptocurrency. Earlier this year, there was the announcement of a class action lawsuit against EthereumMax, in which Kim Kardashian and Floyd Mayweather were both listed for an alleged “pump and dump” scheme. The lawsuit alleges that EthereumMax used celebrity endorsements to pump up this coin’s value to inflate its price before selling its shares for a profit.

However, the lawsuit and investigation remain unresolved, while this fine came from the coin’s promotion. A failure to disclose payment for touting a stock is a direct violation of federal securities law. The SEC believes that the public deserves to know whether the promotion of an investment is objective or not. When a celebrity is compensated to promote any kind of investment, it is considered biased.

The main problem is that crypto is an unregulated area, many new projects have appeared in recent years that are either complete scams or just have no use. Since the space is unregulated, almost anyone can put together some sort of crypto project without having to go through the proper registration process of traditional securities. It is difficult for the public to know if a celebrity actually believes in a project or if they have just accepted payment for profit.

What does this mean for crypto?

This fine and the media attention it has received will have many people talking about cryptocurrency. The SEC has taken a firm stance on celebrities and influencers who promote cryptocurrency projects to the public without disclosing financial ties.

This could also be a sign of further regulation in the cryptocurrency space. We recently wrote about the Ethereum merger, which led the SEC to state that switching to the proof-of-stake (PoS) mechanism could mean that a blockchain would be considered a security. If this happens, the entire Ethereum blockchain must be registered with the SEC. If Ethereum is marked as a security, every other cryptocurrency that uses the PoS system (such as Cardano and Solana) must also be registered with the SEC. These would be unwanted regulations for the world of decentralized crypto.

We will continue to update you on what is happening in terms of cryptocurrency regulations. As mentioned earlier, the investigation into this situation with EthereumMax is not over yet.

What should you know about investing in crypto?

We’ve all seen how volatile the stock market can be in 2022, with the market reacting to any news of interest rate hikes or global conflicts. The cryptocurrency market is even more volatile than the stock market since it is open 24/7. The Luna crash earlier this year wiped out an estimated $60 billion from the crypto market.

We must reiterate that investing even in the most popular cryptocurrency coins is risky. For example, as of October 3rd, Ethereum is down 64.08%, while Bitcoin is already down 57.54% for 2022. As you can imagine, you would be down a significant amount if you had invested in these coins around the beginning of the year. For what it’s worth, if you chart the timing of these celebrity crypto endorsements, you’ll see that they have a disastrous track record.

Since the cryptocurrency space is unregulated, it can be difficult to determine the legitimacy of a project. We encourage you to find out as much information as possible before investing in a coin that is relatively new or does not have much data.

How can you invest in crypto?

Many of us still want to invest in cryptocurrency as the world adopts digital currencies. One way to invest in crypto without picking individual coins based on too little data is to invest in our crypto set which helps spread the risk across the industry. Our AI works 24/7 to select investments and allocate portfolio weights.

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