Grygo is the chief content officer for FTF & FTF News.
A reality star is facing the harsh truths of the world of cryptocurrencies and digital assets, and the consequences of a busy regulator who is closely watching celebrities endorsing a garden variety of cryptocurrencies, tokens, and other digital assets as securities.
The SEC has just settled with reality star Kim Kardashian “for touting on social media a crypto asset security offered and sold by EthereumMax [EMAX] without disclosing the payment she received for the promotion.”
In its order, the SEC alleges that “Kardashian failed to disclose that she was paid $250,000 to publish a post on her Instagram account about EMAX tokens, the crypto asset security being offered by EthereumMax. Kardashian’s post contained a link to the EthereumMax website, which provided instructions for potential investors to purchase EMAX tokens.”
Kardashian’s endorsement probably had a great impact on EMAX as she is an influencer with a huge following. She is said to be worth $1.8 and has made her fortune via a variety of endorsements seen on the Instagram social media site.
Kardashian and the SEC came to an agreement to settle the charges and she will also cooperate with the SEC’s ongoing investigation of the situation.
“Without admitting or denying the SEC’s findings, Kardashian agreed to pay the aforementioned $1.26 million, including approximately $260,000 in disgorgement, which represents her promotional payment, plus prejudgment interest, and a $1,000,000 penalty. Kardashian also agreed to not promote any crypto asset securities for three years,” according to the SEC.
The reason that SEC focused on Kardashian rather than those actors, comedians, and rap artists who have also done similar endorsements is that she blessed an actual security and not just a company.
“Gensler’s bluster notwithstanding, legally speaking, it’s fine for celebrities and influencers to endorse investment opportunities, including crypto investments. Where Kardashian crossed the line was when she endorsed a crypto asset security,” explains financial writer Felix Salmon in a piece for the website Axios, “Why Kim Kardashian got fined and Matt Damon didn’t.”
In fact, 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,” says Gurbir S. Grewal, director of the SEC’s Division of Enforcement, in a prepared statement. “Investors are entitled to know whether the publicity of a security is unbiased, and Ms. Kardashian failed to disclose this information.”
Kim Kardashian
The situation is ripe for an episode of a reality show as Kardashian has passed the First-Year Law Students’ Exam in California. It would be interesting to watch how an aspiring lawyer deals with a serious, personal legal matter and resolves it. As she has put every other major chapter of her life in the public eye, it’s interesting to wonder if she would document this episode of her life. Given that she dealt with it rather swiftly, it’s quite possible that she wants it to go away quickly. However, the value of the EMAX tokens ultimately nosedived and investors are suing her and other major names in a class-action lawsuit.
FTF News reached out to her lawyer for comment but there was no response to inquiries by deadline.
“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,” says Gary Gensler, chair of the SEC in a statement.
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