Washington DC, October 3, 2022 —
The Securities and Exchange Commission today announced charges against Kim Kardashian for promoting on social media a crypto-asset security offered and sold by EthereumMax without disclosing the payment she received for the promotion. Kardashian agreed to settle the charges, pay $1.26 million in penalties, disgorgement and interest, and cooperate with the commission’s ongoing investigation.
The SEC order notes that Kardashian failed to disclose that she was paid $250,000 to publish a post on her Instagram account via EMAX token, the crypto asset security offered by EthereumMax. Kardashian’s post included a link to the EthereumMax website, which provided instructions for potential investors to buy EMAX tokens.
“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,” said SEC Chairman Gary Gensler. “We encourage investors to consider the potential risks and rewards of investing in light of their own financial goals.”
“Ms. Kardashian’s case also serves as a reminder to celebrities and others that they are legally required to disclose to the public when and how much they are being paid to encourage investment in securities,” Chairman Gensler added.
“Federal securities laws are clear that any celebrity or other person promoting a crypto security must disclose the nature, source and amount of compensation received in exchange for the endorsement,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “Investors have a right to know whether advertisements for a security are impartial, and Ms. Kardashian has not disclosed that information.”
The SEC’s order finds that Kardashian violated the anti-touting provision of the federal securities laws. Without admitting or denying the SEC’s findings, Kardashian agreed to pay the aforementioned $1.26 million, including approximately $260,000 in disgorgement, which constitutes her endorsement payment, plus pre-judgment interest and a penalty in the amount of US$1,000,000. Kardashian also agreed not to endorse cryptocurrency securities for three years.
The SEC’s ongoing investigation is being conducted by Jon A. Daniels, Alison R. Levine, and Pamela Sawhney of the Enforcement Division’s Crypto Assets and Cyber Unit, and Kerri Palen, Lisa Knoop, and Victor Suthammanont of the New York Regional Office. The case was handled by Mark R. Sylvester of the Crypto Assets and Cyber Unit and Carolyn Welshhans.
The SEC’s statement urging caution regarding potentially illegal celebrity-backed crypto asset offerings can be found here. SEC Chairman Gensler released a video today warning investors not to base investment decisions solely on the recommendations of a prominent influencer.