Kim Kardashian is paying $1.26 million in a settlement agreement with the Securities and Exchange Commission amid charges that she unlawfully touted a cryptocurrency without disclosing that she was paid for the promotion.
Kardashian is paying the settlement without admitting or denying the SEC’s findings, the agency said Monday. She also agreed not to promote crypto-asset securities for three years.
The fine is linked to a cryptocurrency called EthereumMax, or EMAX, which has been touted to investors as a disruptive new cryptocurrency. Kardashian was one of several celebrities, along with boxer Floyd Mayweather and former NBA star Paul Pierce, to use their fame to hype the crypto-asset and became the focus of a class-action lawsuit over their endorsements in January.
“This case is a reminder that celebrity or influencer endorsement of investment opportunities, including crypto-asset securities, does not mean those investment products are appropriate for all investors,” SEC Chairman Gary Gensler said in a statement.
The dwindling value of EMAX
EMAX launched last May with an initial trading volume of $16.1 million, according to data from CoinMarketCap. That number grew after social media posts from Kardashian and Pierce, as well as incentives from Mayweather — like autographed boxing gloves, ringside tickets, and discounts for those who bought fight tickets online with EMAX tokens — the alleged suit said. At one point, EMAX’s trading volume grew to nearly $108 million.
The digital coin’s creators — Connecticut’s Steve Gentile and Florida’s Giovanni Perone — sold their holdings of EthereumMax “for sizable gains” as hype around the currency swelled, according to the lawsuit.
The price of EMAX fell 3.3% to 0.000000004246 cents as of Monday morning, according to CoinMarketCap.
At the time she promoted EMAX, Kardashian had around 225 million followers on Instagram, according to securities regulators.
“Kardashian has been promoting a crypto asset security on her Instagram account in exchange for a financial payment from the issuer,” the SEC said in a legal document.
The agency said Kardashian will be cooperating with the ongoing investigation.
disclosure of their payday
Suing celebrities who endorse products has proven difficult in the past, as attorneys must prove the person made money illegally. In Kardashian’s case, the SEC said it did not disclose that it received $250,000 for publishing a post on its Instagram account via EMAX tokens. Kardashian’s post also included a link to the EthereumMax website, which provided instructions for potential investors to buy EMAX tokens.
“Federal securities laws require that any celebrity or other person promoting a crypto asset security must disclose the nature, source and amount of compensation they received in exchange for the promotion,” Gurbir Grewal said , director of the SEC’s Division of Enforcement in a prepared statement.
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The SEC said Kardashian’s settlement included approximately $260,000 in disgorgement, which covers the amount she made from promoting the cryptocurrency plus interest, and a $1 million penalty.
Kardashian isn’t the first celebrity to attract the attention of regulators for their involvement in cryptocurrencies. In 2018, the agency settled charges against Mayweather and music producer DJ Khaled for failing to disclose payments they received for promoting digital currency investments.
The Associated Press contributed to this report.
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