Kim Kardashian has paid $1.26 million to settle a Securities and Exchange Commission (SEC) claim that she illegally promoted a cryptocurrency investment scheme on Instagram.
According to the SEC, Kardashian did not disclose that she received a $250,000 payment last June to promote EthereumMax tokens. Kardashian posed the question to her fans in a series of images to her Instagram story, “Are you guys into crypto??? Sharing what my friends have recently told me about the Ethereum Max Token is not financial advice. The EthereumMax website was subsequently recommended to her followers, who were urged to “join the E-Max community.”
Kardashian included several hashtags to the posts, such as “#commercial,” implying that the tales were sponsored advertisements. However, the SEC claims that this degree of disclosure is insufficient for investments in cryptocurrencies, leading to the $1.26 million penalties. Federal guidelines on influencer marketing advise users to “superimpose the disclosure over the photo and make sure viewers have enough time to notice and read it.” This recommendation extends to Instagram Stories.
In a video posted to YouTube, the commission further clarified their justification:
Because of the settlement’s terms, Kardashian merely needs to pay the money and is not required to accept or refute the SEC’s conclusions. This sum consists of a $260,000 “disgorgement” (which includes the sum that Kardashian received in compensation for promoting the token) and a $1 million fine.
In a news release, SEC chair Gary Gensler said, “This case is a reminder that just because celebrities or influencers recommend investing possibilities, including crypto asset securities, doesn’t indicate that those investment products are suited for all investors.” We advise investors to take their personal financial objectives into account when evaluating an investment’s possible risks and opportunities.
Kardashian is also the subject of a class action lawsuit, along with another celebrity Floyd Mayweather, for their marketing of EthereumMax. According to investing website The Ascent, the project advertised itself as a “cultural token” that would grant users access to sporting and entertainment events, but it was not listed on any significant cryptocurrency exchange and had no affiliation with more well-known tokens like Ethereum (beyond sharing part of a name). The EthereumMax token has lost 97% of its value since reaching a high in last June at the time the class action complaint against Kardashian and Mayweather was launched.
