On October 3, 2022, the U.S. Securities and Exchange Commission (SEC) filed charges against reality TV star and socialite Kim Kardashian for unlawfully promoting the crypto asset EthereumMax (EMAX). The regulator announced that Kardashian agreed to settle the charges and pay $1.26 million in penalties, while also pledging to cooperate with the ongoing investigation.
Undisclosed Paid Promotion
According to the SEC, in mid-June 2021, Kardashian posted on her Instagram account, which had 228 million followers, an “#AD” marked post promoting the EthereumMax token. She said she was “sharing what my friends just told me about the Ethereum Max token” and included a link to the EthereumMax website with instructions for purchasing EMAX tokens. However, she failed to disclose that she had been paid $250,000 for the post. The SEC determined this violated federal anti-touting laws.
Kardashian was not the only celebrity shilling EMAX. Professional boxer Floyd Mayweather and former Boston Celtics forward Paul Pierce had also promoted the token. This case underscores the SEC’s focus on holding influencers accountable for failing to disclose compensation when endorsing investment products.
SEC Chair Gary Gensler’s Statement
SEC Chair Gary Gensler issued a statement on the charges and appeared in an animated video about the affair. “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,” Gensler said. “We encourage investors to consider an investment’s potential risks and opportunities in light of their own financial goals.” He added: “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.”
Without admitting or denying the allegations, Kardashian agreed to pay $1.26 million, including approximately $260,000 in disgorgement. She also promised not to promote any crypto asset securities for a period of three years.
Broader Implications
The case comes during a challenging month for Kardashian, who has been dealing with controversy over a leaked sex tape featuring herself and singer Ray J. Nevertheless, the SEC’s enforcement action sends a clear message that even celebrities with massive followings must comply with disclosure rules when promoting securities, including crypto assets. Industry observers view this as a significant step in regulating celebrity-endorsed crypto schemes and protecting retail investors from misleading promotions.