Kim Kardashian will pay $1.26 million to settle charges from the Securities and Exchange Commission over a cryptocurrency ad she posted on Instagram Stories. The socialite and reality TV megastar received $250,000 to post about EthereumMax's EMAX tokens but didn't disclose that she was paid to do so, according to the agency.
The SEC determined that Kardashian violated the anti-touting provision of federal securities laws. She didn't admit or deny the charges, though agreed to pay a $1 million penalty and around $260,000 in disgorgement, which the SEC said covers the fee she received for the ad plus prejudgement interest. In addition, Kardashian pledged not to promote cryptocurrency assets for three years.
"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," SEC chair Gary Gensler said. "We encourage investors to consider an investment’s potential risks and opportunities in light of their own financial goals."
Earlier this year, a class-action suit took aim at Kardashian and Floyd Mayweather for promoting EthereumMax tokens. It accused the defendants of participating in a pump and dump scheme, in which investors promote an asset and sell their interest in it after the value rises. The suit claimed the value of the token soared by 632 percent after Mayweather and former NBA player Paul Pierce (another defendant in the case) promoted it.
According to a survey, 19 percent of people who heard about an Instagram Story from Kardashian that mentioned the cryptocurrency invested in EthereumMax. The lawsuit asserts that the value of the token nosedived by 98 percent the day after Kardashian's post.
This is far from the first time that Kardashian has been accused of publishing sponsored posts without disclosing that they're ads. Federal Trade Commission guidelines suggest that those who are paid to endorse something on social media should include the #Ad hashtag or include terms like "Sponsored," "Promotion" or "Paid ad."
In an incredible case of serendipity, a new podcast narrated by Kardashian, who is studying to become a lawyer, premiered on Spotify on Monday. The System: The Case of Kevin Keith is a true-crime podcast.