The Securities and Exchange Commission has charged Kim Kardashian for promoting a crypto security asset called EthereumMax on Instagram without disclosing she was paid to do so.
Kardashian agreed to settle the charges by paying $1.26 million and cooperating with the SEC’s ongoing investigation, the commission said Monday in a statement. Kardashian neither admitted nor denied the SEC’s findings. She agreed to not promote any crypto asset securities for three years.
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The payment includes a $1 million penalty plus $260,000, which represents what Kardashian was paid plus interest.
“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,” SEC Chair Gary Gensler said in the statement.
“Are you guys into crypto????” Kardashian wrote in all capital letters on her Instagram story in June 2021. “This is not financial advice but sharing what my friends just told me about the Ethereum Max token!”
The SEC charges aren’t the first trouble for Kardashian over that post.
Kardashian, boxer Floyd Mayweather Jr, basketball player Paul Pierce, and the currency’s creators were sued in a class-action case in California that alleges a “pump and dump” scheme — in which fraudsters spread misleading information to get people to buy an asset, driving up the price, then sell their shares at the higher price. The plaintiffs in the case say they were damaged by buying EthereumMax between May 14, 2021, and June 27, 2021.
EthereumMax told the BBC at the time that its celebrity endorsements were “simply intended to raise awareness of the project and its utility.”
EthereumMax has suffered a 98% wipeout in its value since the end of May 2021, according to Bloomberg.
Charles Randell, then head of the U.K.’s Financial Conduct Authority, specifically called Kardashian out in a speech in September 2021. Randell said the reality star’s post to her 250 million Instagram followers “may have been the financial promotion with the single biggest audience reach in history.”
“Of course, I can’t say whether this particular token is a scam,” Randell continued. “But social media influencers are routinely paid by scammers to help them pump and dump new tokens on the back of pure speculation. Some influencers promote coins that turn out simply not to exist at all.”
The world of celebrity crypto endorsements has become truly wild. Super Bowl ads for crypto bombarded Americans with messages to invest in products that people might not really understand. Celebrities like Matt Damon, Mike Tyson, Reese Witherspoon and Tom Brady have promoted crypto currencies, but haven’t said much about it since the assets lost most of their value this year.
The crash promoted critics and proponents of the digital assets to call for more regulation, HuffPost reported.
Sen. Elizabeth Warren (D-Mass.) said the crash is “a reminder of what happens in an unregulated market where lots of money is moving around fast, nobody has any transparency into it, and there are no rules to make sure that consumers are protected.”
Jake Chervinsky, head of policy for the Blockchain Association, the industry’s lead lobbying group in Washington, endorsed calls for Congress to step in.
Kardashian didn’t acknowledge the SEC’s action on her social media as of Monday morning, but she was promoting a grey wastepaper basket for $129 on her Instagram story.