The United States Securities and Exchange Commission (SEC) announced Monday that it had filed charges against Kim Kardashian for promoting EthereumMax on social media without disclosing that she had been compensated for the promotion. The reality star settled the charges for $1.26 million.
Kardashian posted to her 250 million Instagram followers in June 2021, touting EthereumMax and its token-burning mechanism. While she did label the post as an “ad,” she didn’t disclose that she had received compensation worth $250,000, and it’s this omission that the SEC charged her for.
In a press release, the SEC claimed that the reality TV star violated the anti-touting provision of the federal securities laws. Without denying or admitting the charges, the reality star agreed to pay a $1 million penalty and $260,000 in disgorgement. She also agreed not to promote any digital asset security for three years.
Commenting on the settlement, SEC Chairman Gary Gensler stated, “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. We encourage investors to consider an investment’s potential risks and opportunities in light of their own financial goals.”
Today @SECGov, we charged Kim Kardashian for unlawfully touting a crypto security.
This case is a reminder that, when celebrities / influencers endorse investment opps, including crypto asset securities, it doesn’t mean those investment products are right for all investors.
— Gary Gensler (@GaryGensler) October 3, 2022
The settlement also serves as a reminder to celebrities that U.S. securities laws require them to disclose to the public “when and how much they are paid to promote investing in securities,” Gensler added.
In an interview with CNBC on Monday, Gensler reiterated this message, stating, “Congress passed a law many decades ago called the Securities Act, and it was to protect the public. Part of that law said that if you tout a stock, you have to disclose if you’re getting paid.”
In addition to the SEC charges, Kim had been sued earlier this year by a group of investors who purchased EthereumMax before it collapsed. The investors, who also sued boxer Floyd Mayweather and former NBA star Paul Pierce, alleged that the three colluded with the token‘s founders to rope investors in and then dump the tokens on them.
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