Kim Kardashian, mega-influencer and model agreed Monday to pay a huge fine after failing to reveal that she was being paid to promote EthereumMax cryptocurrency. Kardashian agreed to pay $1.26 million in penalties to the Securities and Exchange Commission (SEC) to settle the charges that she had illicitly touted the crypto tokens via her Instagram account – inviting her 328 million followers to invest.
Kardashian said in a June 2021 Instagram posting that “this is not financial advice.” But sharing the information my friends have just given me about EthereumMax!
“#ad” was among the hashtags used. The post included a link that took you to EthereumMax’s site, where you can find instructions about how to get the tokens.
Mega Fine For Kardashian
On Monday, SEC officials announced that the SEC had brought charges against the social media star. SEC found Kardashian had not disclosed that she received $250,000 in compensation to post a picture on Instagram about EMAX tokens. The charges were settled by Kardashian, who agreed to cooperate in the ongoing investigation of the Commission and pay penalties, interest, disgorgement and penalty amounts totaling $1.26 Million.
Gary Gensler, SEC Chair, stated that “this case serves as a reminder that celebrities and influencers don’t necessarily endorse investments opportunities including crypto assets securities.” “We urge investors to assess the risks and potential opportunities of an investment in light their personal financial goals.”
Gensler also stated that Gensler’s case was important because it should remind celebrities and other people that public disclosure is required of them regarding the amount and timing of their payments to help promote securities investing.
Experts suggest that Kardashian might have attempted to say that Kardashian was able to meet the SEC’s requirements by claiming that “#ad” sufficed. Yet, while the SEC filed against Kardashian for violating its rules, it also pointed out that the Securities Act specifically requires that disclosure be made of how much she received in exchange for publicity.
Kardashian did not disclose at any point that she received $250,000 for promoting the EMAX tokens.
Charles King, a technology analyst at Pund-IT sent an email explaining that Kim Kardashian wasn’t the only celeb to fall into crypto trouble.
King stated that 2018 saw Boxer Floyd Mayweather, and DJ Khaled pay $600k and $155,000 in SEC penalties for not disclosing fees for their endorsement of Centra Tech.
Social Media Advice for Investment
In fact, the SEC encourages investors and discourages them from using celebrity endorsements. Although many investors today continue to look to social media for financial advice, a lot of them are influenced by the platform’s influencers. The survey by 2021 CreditCards.com found that about 52% (millennials, Generation Z) received financial advice through social media sites like Instagram and Facebook. They considered the advice trustworthy.
Other celebrities and influencers who failed to declare that they had been paid to promote crypto may also be targeted by the SEC. Kardashian could face scrutiny from the SEC and possibly fines.
He said that Kim Kardashian’s $1.26M penalty could have been evidence that the SEC is targeting crypto-promoting celebrities like Tom Brady or Matt Damon, given her public image. Kardashian is unlikely to be financially hurt by the SEC’s fine, but Mayweather and investors may sue her for not disclosing payments received from EthereumMax.
Since Kardashian promoted it, the EMAX cryptocurrency has seen a 95% drop in value. Even though many celebrities who promoted the virtues and benefits of cryptocurrency on social media didn’t have to be scrutinized by the SEC, there is little chance that any of them will promote digital currency in the future.
King said, “Those risks are ones that smart people would rather avoid, even celebrities,” and added, “Especially when you consider the $250k Kardashian was paid for her endorsement.”