Kim Kardashian Fined $1.25 Million For Promoting Crypto On Social Media – Could Other Celebrities Be Charged?

Mega-influencer Kim Kardashian on Monday agreed to pay a mega fine for not disclosing that she was paid to promote the EthereumMax cryptocurrency. Kardashian agreed to pay $1.26 million in fines to the Securities and Exchange Commission (SEC) to settle allegations that she had illegally touted the crypto tokens via her Instagram account — and invited her 328 million followers to invest.

“This is not financial advice,” Kardashian wrote in her June 2021 Instagram post. “But I’m sharing what my friends just told me about the EthereumMax token!”

Among the various hashtags included was “#ad”, but the post also included a link to EthereumMax’s website, which provided instructions on how to purchase the digital tokens.

Great for Kardashian

The SEC announced the charges against the social media superstar on Monday. The SEC’s order found that Kardashian failed to disclose that she was paid $250,000 to publish a post on her Instagram account about EMAX tokens. She had agreed to settle the charges, pay $1.26 million in fines, disgorgement and interest, and cooperate with the commission’s ongoing investigation.

“This case is a reminder that when celebrities or influencers endorse investment opportunities, including securities in cryptoassets, that does not mean those investment products are right for all investors,” SEC Chairman Gary Gensler said. “We encourage investors to consider an investment’s potential risks and opportunities in light of their own financial goals.”

In addition, Gensler said the case should serve as a reminder to celebrities and others that the law requires them to disclose to the public when and how much they are paid to promote investment in securities.

Some experts have suggested that Kardashian might have tried to argue that the “#ad” was enough to satisfy the SEC’s rules, but in its filing against the influencer, the SEC also noted that the Securities Act explicitly requires disclosure of the amount received for the publicity of a security.

At no point in her post did Kardashian reveal that she was paid $250,000 to promote the EMAX tokens.

“Kim Kardashian isn’t the only celebrity to run into crypto trouble,” technology analyst Charles King of Pund-IT explained in an email.

“In 2018, Boxer Floyd Mayweather and music producer DJ Khaled paid $600,000 and $150,000, respectively, in SEC fines for failing to disclose fees they were paid to support Centra Tech,” King continued.

Investment advice on social media

The SEC actually encourages investors to do their own research, and it also discourages anyone from relying on paid celebrity endorsements. But today, many young investors continue to turn to social media, and especially influencers on the platforms, for financial advice. According to a 2021 CreditCards.com survey, approximately 52% of millennials and Gen Z received financial advice from social media, including Facebook and Instagram, and found the advice offered to be trustworthy.

The SEC may target other influencers and celebrities who have failed to disclose that they were paid to promote crypto, and Kardashian may be the first, not the last, to face such scrutiny and fines from the SEC.

“Given her high public profile, Kim Kardashian’s $1.26 million fine may be evidence that the SEC has crypto-promoting celebrities, such as Tom Brady and Matt Damon, in their sights as well,” he added. “The SEC fine likely won’t hurt Kardashian much, at least financially, but investors are reportedly suing her and Mayweather for failing to disclose the payments they received from EthereumMax.”

The EMAX crypto has lost 95% of its value since Kardashian promoted it. As a result, although many of the celebrities who touted the virtues of crypto on social media are not being investigated by the SEC, it is likely that few will continue to promote digital currencies going forward.

“These are risks that reasonable people, even celebrities, would prefer to avoid,” King said, adding, “especially considering the relatively paltry $250,000 that Kardashian received for her endorsement.”