The Securities and Exchange Commission has settled with Kim Kardashian following accusations that the reality TV personality and businesswoman misled her followers by not disclosing she was paid to post about an up and coming cryptocurrency exchange.
Kardashian will pay $1.26 million for the June 2021 post in which she encouraged followers to learn about EthereumMax’s Emax tokens.
“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 percent of their admin wallet giving abc to the entire e-max community,” she wrote at the time.
The SEC said Kardashian received $250,000 in payment for promoting the exchange on her Instagram account but did not disclose that the post was a paid endorsement, in violation of the Securities Act, according to court documents.
Kardashian hash-tagged #Ad at the end of the post but that was not sufficiently clear, according to the SEC.
“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 in a statement. “We encourage investors to consider an investment’s potential risks and opportunities in light of their own financial goals.”
Kardashian’s settlement, initiated by her camp, includes a $1 million fine plus forfeiture of the monies she was paid for the endorsement, according to court documents.
Heavyweight legend Floyd Mayweather was also named in a class-action lawsuit brought by EthereumMax investors in January, claiming EthereumMax and its celebrity promoters worked together to artificially inflate the price of the token. Mayweather endorsed the token in his boxing match with YouTube star Logan Paul.
“EthereumMax was accepted as payment for tickets to the event, a move the lawsuit claims boosted trading volumes sharply,” NBC News reported.
Mayweather was reportedly booed off stage at a later bitcoin conference in Miami for touting the exchange’s potential.
“EthereumMax has lost around 97 percent of its value since early June , leading some investors to label it as a ‘pump and dump’ scheme where scammers attempt to boost the price of an asset through false or misleading statements,” NBCnews.com reported at the time.
The celebrities’ unlawful promotion comes after the SEC issued a statement in 2017 warning influencers of the potentially criminal actions involved in promotion without disclosure, writing “that virtual tokens or coins sold in ICOs may be securities, and those who offer and sell securities in the United States must comply with the federal securities laws.”
“Any celebrity or other individual who promotes a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion,” the SEC statement read. “These endorsements may be unlawful if they do not disclose the nature, source, and amount of any compensation paid, directly or indirectly, by the company in exchange for the endorsement. The SEC’s Enforcement Division and Office of Compliance Inspections and Examinations encourage investors to be wary of investment opportunities that sound too good to be true. We encourage investors to research potential investments rather than rely on paid endorsements from artists, sports figures, or other icons.”
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