Facepalm: If you're a celebrity who wants to add even more money to an already enormous bank account, don't promote crypto assets to your social media followers without clearly disclosing that it's a paid post. Kim Kardashian learned this the hard way and must now pay $1.26 million to settle SEC charges over her actions.
Kardashian posted an Instagram Story last year to her 278 million followers about Emax tokens, the crypto asset security offered by EthereumMax, which has no connection to Ethereum. While the influencer added a tiny disclaimer noting that it was a paid advertisement, she claimed in the post---which didn't look like an ad---to have heard about the coin from friends. Kardashian also failed to disclose that she was paid $250,000 to publish the post.
"ARE YOU INTO CRYPTO??? THIS IS NOT FINANCIAL ADVICE BUT SHARING WHAT MY FRIENDS JUST TOLD ME ABOUT THE ETHEREUM MAX TOKEN," read the post, which included a link to the EthereumMax website where there was a section explaining how potential investors could buy the token.
The post caught the eye of the US Securities and Exchange Commission. The agency charged Kardashian for failing to disclose her payment. She has now settled the charges with a $1.26 million fine, which represents her promotional payment, plus prejudgment interest and a $1,000,000 penalty. The reality TV star has also agreed not to promote any crypto asset securities for three years.
"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," said SEC Chair Gary Gensler. "We encourage investors to consider an investment's potential risks and opportunities in light of their own financial goals."
Floyd Mayweather has also been in trouble for promoting crypto, including EthereumMax. He wore an EthereumMax URL ad on his shorts during an exhibition boxing match with Logan Paul. A group of investors filed a lawsuit against Kardashian, Mayweather, and basketball star Paul Pierce earlier this year for promoting the token.
Mayweather and DJ Khaled were hit with massive SEC fines---over $600,000 and $150,000, respectively---in 2018 for not disclosing that they were paid to promote initial coin offerings (ICOs). And Steven Seagal had to pay more than $300,000 for promoting an ICO without disclosing payments in 2020, but then the actor doesn't seem to be doing much these days, so he probably needed the money.