The Securities and Exchange Commission (SEC) announced in a recent press release that it's charging celebrity influencer Kim Kardashian for violating Section 17(b) of the Securities Act of 1933, or the anti-touting provision.
Kardashian was paid to promote EthereumMax (or EMAX), a crypto asset security, to her 210 million Instagram followers in June 2021. The EMAX ad read:
ARE YOU GUYS INTO
THIS IS NOT FINANCIAL ADVICE BUT SHARING WHAT MY FRIENDS JUST TOLD ME ABOUT THE ETHEREUM MAX TOKEN!
A FEW MINUTES AGO ETHEREUM MAX BURNED 400 TRILLION TOKENS- LITERALLY 50% OF THEIR ADMIN WALLET GIVING BACK TO THE ENTIRE E-MAX COMMUNITY.
#EMAX #DISRUPTHISTORY #ETHEREUMMAX #WTFEMAX #GIOPEMAX @ETHEREUMMAX #AD
Although Kardashian included "#ad"—a hashtag used to signify that the post is an advertisement—she failed to disclose the necessary information required by federal securities law, such as "the nature, source, and amount of compensation" she received.
"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 Gary Gensler, chairman of the SEC. "We encourage investors to consider an investment's potential risks and opportunities in light of their own financial goals."
"Ms. Kardashian's case also serves 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 investing in securities," Gensler added.
Without confirming or denying the SEC's findings, Kardashian agreed to pay the $1.26 million fine, which includes approximately $260,000 in disgorgement, pre-judgment interest, and a penalty. Kardashian also agreed not to promote any crypto asset securities for three years.
Chairman Gensler also released a YouTube video the day Kardashian was officially charged. In it, he cautions people interested in investing to be wary of promotions or endorsements by celebrities and influencers.
"So before investing, please do your research," Gensler said in the video. "Consider the investment's potential risks and benefits in light of your own financial goals. Search a company's finances, organization, and business prospects through the Securities and Exchange Commission's database called EDGAR."
"And when it comes to crypto, remember, many of these are highly speculative assets. You may be wondering if it's right for you or even if it might be a scam."
Finally, Gensler advises people to check out resources about investing at Investor.gov.
Image of Kim Kardashian's signature licensed under CC BY-SA 4.0.