Kim Kardashian has paid $1.26 million after being sued by the Securities and Exchange Commission (SEC) for unlawfully promoting a crypto investment program on Instagram.
The SEC says Kardashian has not disclosed that she was awarded $250,000 last June to promote EthereumMax tokens. In a series of posts on her Instagram storyKardashian asked her followers: “Do you like crypto??? This is not financial advice, but sharing what my friends just told me about the ethereum max token!” Her followers were then encouraged to go to the EthereumMax website and “join the E-Max community.”
Kardashian included a number of hashtags in the posts, including “#ad,” suggesting the stories were a paid promotion. But the SEC says this level of disclosure is inadequate for crypto investments, resulting in the $1.26 million fine. Federal Guidelines for Influencer Marketing recommend a more aggressive disclosure for Instagram Stories, advising users to “post the disclosure over the photo and ensure viewers have enough time to notice and read it.”
“Investors have a right to know whether a security’s publicity is unbiased”
In a press statement at the announcement, SEC Enforcement Director Gurbir S. Grewal said the required disclosure should have been clear. “Federal securities laws are clear that any celebrity or other person promoting a crypto asset security must disclose the nature, source and amount of compensation they received in return for the promotion,” Grewal said. “Investors have a right to know whether a security’s publicity is unbiased and Ms. Kardashian has not disclosed this information.”
The committee also explained its rationale in a YouTube video:
The nature of the settlement means that Kardashian doesn’t have to admit or deny the SEC’s findings, just pay the money. This includes $260,000 in “disgorgement” (including how much Kardashian was paid to promote the token) and a $1 million fine.
“This case reminds us that when celebrities or influencers endorse investment opportunities, including crypto asset securities, it does not mean that those investment products are appropriate for all investors,” SEC Chair Gary Gensler said in a press statement. “We encourage investors to consider the potential risks and opportunities of an investment in light of their own financial goals.”
Kardashian is also the target of a class action lawsuit along with fellow celebrity Floyd Mayweather for their promotion of EthereumMax. The project called itself a “culture token” that would give holders access to concerts and sporting events, but, as reported by the investment site the ascent, was not listed on any major cryptocurrency exchange and had no connection to more well-known tokens like Ethereum (other than sharing part of a name). At the time of the class action lawsuit against Kardashian and Mayweather, the EthereumMax token had lost 97 percent of its value from its June high.