- Kardashian was paid $250,000 to publish a post on her Instagram account about EMAX tokens, the SEC says
- The celebrity has agreed to a settlement for $1.26 million and to cooperate with the SEC’s investigation
Celebrity influencer Kim Kardashian has agreed to a $1.26 million settlement with the SEC over her June 2021 endorsement of EthereumMax (EMAX).
Kardashian hawked the previously unknown SafeMoon copycat to her 225 million followers on Instagram without disclosing that she was being paid $250,000 for the promotion.
“The federal securities laws are clear that any celebrity or other individual who promotes a crypto asset security must disclose the nature, source, and amount of compensation they received in exchange for the promotion,” Gurbir Grewal, director of the SEC’s Division of Enforcement, said in a statement.
Financial services firm Morning Consult found that some 54 million US adults were aware of Kardashian’s post. Of those, roughly 10 million said they invested in EthereumMax, the consultancy reported in September 2021.
Within two weeks, the token’s price crashed 96%, prompting allegations that it was no more than a “pump and dump scheme.”
“Scam projects usually like more influencers with less sophisticated audience as followers are more likely to go and buy the token with zero research and questions,” Serhii Zhdanov, CEO of cryptocurrency exchange EXMO, told Blockworks by email.
“If token allocates the same budget to the top influencers in finance/markets/economics category, it gets much worse results as the followers there are much more experienced,” he said.
A class action lawsuit followed alongside an SEC investigation, which is “ongoing,” and Kardashian is cooperating with the regulator, according to the statement.
Among the terms of the settlement agreement, Kardashian will be prohibited from promoting any “crypto asset security,” for a period of three years.
She is ordered to disgorge the $250,000 proceeds of her actions, plus interest, and pay a $1 million civil penalty to the SEC, which may, at its discretion, distribute the funds to investors or transfer them to the US Treasury.
Gabriel Shapiro, general counsel at Delphi Digital Labs, said on Twitter that the settlement represented a “stiff fine [and] an unusual direct rebuke from [SEC Chair] Gensler.” He noted that the original social media post by Kardashian was labelled as an advertisement, but she still ran afoul of securities laws because her compensation was undisclosed at the time.
The 41-year-old celebrity is estimated to have a net worth of $1.4 billion, so the civil penalty is the equivalent of a $90 fine incurred by a median average US family.
This story was updated on Oct. 4, 2022, at 10:15 am ET.
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