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Kim Kardashian ordered to pay $1.26 million to SEC

By Victor Hoang, Staff Writer

Reality TV star, social media influencer and entrepreneur Kim Kardashian landed in hot water with federal regulations, specifically the SEC (Securities and Exchange Commission), who announced the charges against her stemming from a June 13, 2021 Instagram post she made promoting a crypto asset security offered by EthereumMax. 

Kardashian was paid $250,000 to post about crypto security tokens sold by EthereumMax on her Instagram account, asking her then 220 million followers: “Are you guys into crypto????” 

The post, featuring the hashtag “#ad,” included a link to the EthereumMax website, which gives users instructions about how to buy the tokens. She did this without disclosing the financial compensation she received, violating Section 17(b) of the Securities Act.

“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 chairman Gary Gensler, said in a news release. 

Gensler said the case also serves as a reminder that the law requires celebrities and others to disclose when and how much they’re paid to promote investing in securities.

Estimated to be worth $1.8 billion, Kardashian has agreed to settle the charges by paying $1.26 million in penalties, disgorgement, interest and cooperation with the Commission’s ongoing investigation. The payment includes the compensation she received, plus interest, and the $1 million penalty. Kardashian has also agreed not to promote crypto assets for three years and will cooperate with ongoing investigations along with SEC. 

However, Kardashian has not commented on the regulator’s feelings.

“I think it was an honest mistake and she was in the wrong, but she is willing to work with the company to make it right,” creative writing professor Gabrille Sharp said. “Kim could have learned more about the topic before creating the post. I think it was wrong for Kim to advertise it as though everyone has access to it and understands it. I think it’ll affect society as a whole, but I personally don’t understand anything about it.”

In a statement, Kardashian’s lawyer Michael Rhodes said his client is pleased to have resolved the matter. 

“Kardashian fully cooperated with the SEC form from the very beginning and she remains willing to do whatever she can to assist the SEC in this matter. She wanted to get this matter behind her to avoid a protracted dispute. The agreement she reached with SEC allows her to do that so that she can move forward with her many different business pursuits,” Rhodes said.

Earlier in the year, there was a class-action lawsuit filed against EthereumMax, where Kim Kardashian and Floyd Mayweather were both listed for an alleged “pump and dump” scheme. It alleges that EthereumMax used celebrity endorsements to pump up the token value to inflate the price before selling their shares for a profit. Failure to disclose payment for touting a stock is a direct violation of federal securities law. 

The SEC believes that the public deserves to know if promotion of an investment is unbiased or not. When a celebrity is compensated for promoting any kind of investment it’s considered biased.

PTW instructor Thomas Conklin feels that Kardashian could have taken steps to avoid this situation. 

“Being aware that she’s dealing with a lot of money, a huge paycheck, knowing the ins and outs, making sure she communicates with her team and knowing this whole process is legitimate,” Conklin said.

Because crypto is an unregulated space, many new projects have been popping up the last few years that are either complete scams or just don’t have any utility. Almost anyone can put together some sort of crypto project without needing to go through the proper registration process for traditional securities. It’s difficult for the public to know if a celebrity actually believes in a project, or if they’ve simply accepted payment for profit.

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