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Some members of the Securities and Exchange Commission’s law enforcement staff are accusing its boss, Gary Gensler, of being a publicity hound for his unusual exposure of charges filed against prominent influencer Kim Kardashian earlier this week, FOX Business has learned.
What irked law enforcement officials — the attorneys who developed the case brought against Kardashian — was that Gensler appeared to be paying tribute to the case alone and on national television. They also say he embellished his meaning to advertise himself.
Kardashian, a billionaire reality star and marketer, paid a fine for violating securities laws by failing to disclose that she made $250,000 promoting the cryptocurrency EthereumMax on her Instagram page.
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The case was far from the SEC’s largest or most significant case in its crypto crackdown, even if Kardashian’s name is attracting a lot of attention. All of this makes Gensler’s rollout of the matter — with a well-timed national television appearance and the release of his own YouTube video — a ploy to get media attention, angry law enforcement officials have been telling people in recent days.
Kardashian, for example, has not been charged with serious violations of securities laws. It did not mislead investors by pumping EthereumMax and then selling the token at a higher price.
Kim Kardashian arrives on the red carpet for the annual White House Correspondents Association Dinner in Washington, USA on April 30, 2022. (Portal/Tom Brenner) (Portal/Tom Brenner / Portal Photos)
Her only violation, according to the complaint, was failing to disclose that she had received payment for her promotion in an ad that appeared on her Instagram page.
“Are you into crypto????” she wrote, according to the Instagram post. “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, which was given back to the entire E-Max community.”
She ended her ad with hashtags, including one that revealed it was actually an ad (“#AD”).
With no admission or denial of wrongdoing, Kardashian spent over $1.26 million to settle the matter. She also agreed to stop promoting crypto for three years and to cooperate with the Commission’s ongoing investigation into the issues surrounding the digital token.
Kardashian is worth an estimated $1.8 billion, according to Forbes.
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SEC officials point out that previous SEC chairmen have held press conferences surrounded by law enforcement officials when announcing high-profile actions. Most of her public appearances have included speeches on general issues, congressional testimonies, or the occasional television interview to explain her agenda.
Gensler, law enforcement officials say, has gone a step further. He has his own segment on the SEC’s official YouTube channel called “Office Hours with Gary Gensler,” in which he promotes various topics that he thinks are important (one episode was titled “The Basics of Investing”) and is a regular feature on financial news television.
Many commissioners believe Gensler will want to polish his resume for a bigger job in the Biden administration like Treasury Secretary if Janet Yellen resigns, as expected after this year’s midterms. Supporters say he is simply trying to update retail investors on potential scams and risky investments in crypto that are increasingly being touted by celebrities.
US Treasury Secretary Janet Yellen has released a new inflation forecast, admitting that an analysis of inflation she provided in May was wrong. (Photo by Chung Sung-Jun/Getty Images) (Photo by Chung Sung-Jun/Getty Images/Getty Images)
Still others say Gensler made crypto regulation a key focus of his tenure at the SEC after being appointed by President Biden in early 2021. He’s trying to solidify the SEC’s authority over crypto — a growing business that government officials say is experiencing significant fraudulent activity — leading many to believe it should be regulated by the Commodity Futures Trading Commission.
“I think the SEC wants to show that they’re the ones protecting individual investors who vote against sophisticated investment schemes — in part to argue that they should at least have the same jurisdiction as the CFTC,” said Columbia Law Professor John Coffee. “Never underestimate the intensity of turf wars in Washington.”
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A spokesman for the SEC declined to comment on the report; Kardashian’s attorney could not be reached for comment.
However, law enforcement officials say the Kardashian case exposure is a perfect example of Gensler’s ways of seeking the limelight.
There was no press conference with Gensler surrounded by the attorneys handling the case. The press release and settlement documents were posted on the SEC’s website at 7:30 am EDT Monday; Gensler tweeted at 7:50 a.m. that he would appear on financial cable news network CNBC to discuss details.
WASHINGTON, DC – SEPTEMBER 14: Gary Gensler, Chairman of the Securities and Exchange Commission, testifies before a Senate Committee on Banking, Housing and Urban Affairs hearing on the SEC’s oversight September 14, 2021 in Washington, DC. (Photo by (Evelyn Hockstein-Pool/Getty Images/Getty Images)
People at the commission believe he leaked details of the case to CNBC long before that, unbeknownst to most law enforcement officials, because the network perfectly timed the breaking news of the case just seconds after 7:30 a.m.
They were also upset by a YouTube video that Gensler produced without their knowledge and tweeted to his followers at 7:30 a.m. EDT. Without naming Kardashian, he warned against believing the celebrity endorsement hype when it comes to risky investment products like crypto.
“A celebrity’s or influencer’s incentives don’t necessarily align with yours. We might enjoy seeing a celebrity play on a basketball court, star in a reality TV show or movie, or perform in front of a large crowd at a stadium show. We shouldn’t do this. However, do not confuse these skills with the very different skills required to provide proper investment advice. Before you invest, please do your research,” he said.
The US Securities and Exchange Commission (SEC) headquarters is seen in Washington, DC on January 28, 2021. – An epic battle unfolds on Wall Street as a cast of characters debate the fate of GameStop, a struggling chain of video g ((Photo by SAUL LOEB/AFP via Getty Images) / Getty Images)
“This stuff is pretty unprecedented in terms of advertising,” said a former senior SEC official who said he’s heard complaints from employees about how Gensler promoted the Kardashian case. “SEC chairmen typically hold press conferences on big cases surrounded by people who did the actual work,” another former SEC official told Fox Business.
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Of course, the SEC officials have no choice but to leave the commission, and they did. Fox Business previously reported that under Gary Gensler’s tenure, SEC executives with nearly 50 years of experience resigned that several senior officials and more than a dozen employees have locked down the enforcement division in recent months over Gensler’s harsh leadership style and aggressive, progressive agenda .
It is said that more law enforcement officers are looking for private sector jobs. The enforcement department, as a former SEC officer who is now in private practice said, “bleeds people.”