Kim Kardashian Ran Afoul of 1930s Law in Instagram Crypto Ad: Gensler
- Kim Kardashian violated a 1930s securities law by promoting crypto on Instagram, the head of the SEC said.
- The SEC said Kardashian had violated Section 17(b) of the Securities Act of 1933.
- “Part of that law said if you tout a stock, you have to disclose not only that you’re getting paid, but also the amount,” Gensler said.
Securities and Exchange Commission Chairman Gary Gensler said Monday that Kim Kardashian was charged over an Instagram post touting a crypto security because she failed to disclose information required under a decade-old US securities law.
The SEC said Monday that Kardashian will pay $1.26 million to settle charges stemming from a June 2021 Instagram post about EMAX tokens, a crypto-asset security sold by EthereumMax.
In an Oct. 3 Securities and Exchange Commission administrative filing, the regulator said by imposing a cease-and-desist order that Kardashian had violated Section 17(b) of the Securities Act of 1933.
“Part of that law said that if you’re selling a stock, you have to disclose not only that you’re getting paid, but also the amount — so the source and the nature of those payments,” Gensler said in a CNBC interview Monday.
The reality TV star’s post contained “#ad” – a hashtag used by social media influencers to mark a post as an advertisement. But the SEC said it found that Kardashian failed to disclose that she was paid $250,000 to publish the post about EMAX tokens. Her post contained a link to the EthereumMax website that had instructions for potential investors to buy tokens, the regulator said.
Gensler said that under other laws, the ad’s hashtag may be appropriate to use in promotions for products such as perfume or vacation homes. “But these are the securities laws … and this was really to protect the investing public when someone claims a stock, and whether it’s a celebrity, an influencer or the like, that’s the heart of what this is about.”
The SEC announced its action against Kardashian on Monday released a video featuring Gensler centered on the message that investment products promoted by celebrities and influencers do not mean they are suitable vehicles for everyone.
The chairman noted in the CNBC interview that the SEC had previously accused boxing champion Floyd Mayweather and record producer DJ Khaled of promoting a Centra Tech coin offering without either of them disclosing that they were paid. The 2018 charges were the SEC’s first cases alleging violations of ICOs. Mayweather and Khaled both agreed to pay more than $100,000 in fines to settle the charges without admitting or denying the findings.
Kardashian, without admitting or denying the findings, also agreed not to promote any crypto-asset securities for three years, the SEC said.
Crypto “is a very speculative asset class. And so when a celebrity or influencer claims it, it’s important that the public understands that relationship and they’re getting paid and how much they’re getting paid on their Instagram page,” Gensler said.
Kardashian cooperated with the SEC and is “pleased” to have resolved the case so she can focus on her business activities, her attorney said in a statement to Insider.
“I will acknowledge that Miss Kardashian has cooperated and [providing] ongoing collaboration, and we really appreciate that,” Gensler said during the interview.
EMAX tokens on Monday shot up 10% to $0.000000004935, according to CoinGecko.
