Kim Kardashian pays $1.26 million SEC fine after receiving secret lumpsum for promoting failing cryptocurrency
By Nikki Jamison // News // EEW Magazine Online
Credit: Getty images for Vanity Fair via EEW Magazine
Be prayerful or you might get scammed out here.
Kim Kardashian has agreed to pay $1.26 million to settle Securities and Exchange Commission charges that she promoted a cryptocurrency on Instagram without disclosing that she’d been paid $250,000 to do so—something that is illegal.
The SEC said Kardashian failed to admit that she was rewarded handsomely for posting about EMAX tokens, a crypto asset security being offered by EthereumMax.
Kardashian’s Instagram post contained a link to the EthereumMax website which provided instructions for potential investors to purchase EMAX tokens.
The token Kardashian was promoting to her then 225 million followers has performed particularly poorly and is now worth less than 10% of its peak price, according to an Associated Press report.
Yikes.
But how many suckers believed that her endorsement meant that the tokens were valuable, legitimate, and a worthy investment?
The 41-year-old reality TV star boasts more than 300 million followers on Instagram and is among many influencers and celebrities paid to promote the crypto industry’s tokens or products—even if they are not stable, reliable, or valuable.
Often, the average nondiscerning Joe or Jane assumes that what Kardashian and other high-profile personalities peddle is worth investing in or buying outright. Therefore, they blindly follow stars and later regret it.
“The federal securities laws are clear that any celebrity or other individual who promotes a crypto asset security must disclose the nature, source, and amount of compensation they received in exchange for the promotion,” Gurbir Grewal, director of the SEC’s division of enforcement, said in a prepared statement.
If the masses followed Grewal’s advice, millions could potentially avoid being duped.
For now, the SEC is cracking down on rule-breakers like Kardashian, the entrepreneur who owns SKIMS, which makes shapewear, loungewear and other products, and a skincare line called SKKN.
As part of the deal, she has agreed to not promote any crypto asset securities for three years.
“Ms. Kardashian is pleased to have resolved this matter with the SEC,” said her lawyer in an email. “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.”
Kardashian is not the first celebrity to attract the attention of financial regulators. In 2018 the SEC settled charges against professional boxer Floyd Mayweather Jr. and music producer DJ Khaled for failing to disclose payments they received for promoting investments in digital currency.
“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,” said SEC Chair Gary Gensler. “We encourage investors to consider an investment’s potential risks and opportunities in light of their own financial goals.”
“Ms. Kardashian’s case also serves as a reminder to celebrities and others that the law requires them to disclose to the public when and how much they are paid to promote investing in securities,” Gensler added.
Cryptocurrency has attracted increasing attention from Congress as well. A bipartisan proposal that emerged last month would hand the regulatory authority over Bitcoin and Ether, two popular cryptocurrencies, to the Commodities Futures Trading Commission after wild swings in crypto valuations, dozens of scams and hundreds of billions of dollars gained and lost.
Cryptocurrencies, after soaring during the pandemic, have had a rough year as prices swing wildly, but mostly lower, leading to intensified scrutiny.
