Kim Kardashian has been prosecuted by the Securities and Exchange Commission (SEC) for her social media advertising of a cryptocurrency sold by EthereumMax (EMAX).
In a statement released on October 3, the SEC highlighted that Kardashian failed to disclose her payment for promoting the controversial cryptocurrency EMAX.
However, all sides have agreed to resolve the matter, with the celebrity agreeing to pay $1.26 million in fines, disgorgement, and interest and cooperate with the SEC while investigations continue.
The statement emphasised that Kardashian neither admitted nor denied the allegations. The fine comprised about $260,000 in disgorgement, prejudgment interest, and a $1,000,000 penalty.
Not permitted to promote crypto
In this instance, the SEC ruled that Kardashian was compensated $250,000 for an Instagram post touting EMAX tokens. In addition, she is prohibited from marketing any cryptocurrency projects for the next 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. We encourage investors to consider an investment’s potential risks and opportunities in light of their own financial goals,” said SEC Chair Gary Gensler.
The defendant allegedly provided a link to the EthereumMax website instructing investors on how to invest in the asset.
Celebrity crypto involvement
In addition, when celebrities have been criticised for pushing crypto ventures without offering cautions, the SEC used the Kardashian case as an example.
“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,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.
Gensler stated that the SEC decided Kardashian had broken the law and that the fines imposed were derived from the conventional banking industry regarding the Securities Act. Additionally, the chair stated that other celebrities, like the musician DJ Khaled and the boxer Floyd Mayweather, have previously been prosecuted for marketing crypto security tokens without full disclosure.
Lawsuit against Kardashian
After a lawsuit was brought against Kardashian for marketing what was deemed a fraudulent cryptocurrency, the SEC filed charges against her. Additionally, the case targeted celebrities such as Floyd Mayweather Jr. and Paul Pierce.
The lawsuit states that the defendants promoted the prospects of the Company [EMAX] and the possibility that investors can earn significant returns owing to the advantageous ‘tokenomics’ of the EMAX Tokens.
Elsewhere, the U.K.’s Financial Conduct Authority criticised Kardashian for pushing cryptocurrency projects that might put investors at risk.
