The Securities Exchange Commission (SEC) has charged American socialite Kim Kardashian for social media promotion of a cryptocurrency offered by EthereumMax (EMAX).
In a statement on October 3, SEC noted that Kardashian failed to disclose the payment she received for promoting EMAX, a crypto that has attracted controversy.
However, both parties have agreed to settle the case, with the celebrity paying $1.26 million in penalties, disgorgement, and interest and agreeing to cooperate with the SEC as investigations continue.
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The statement noted that Kardashian did not admit or deny the charges against her. Part of the fine included about $260,000 in disgorgement and prejudgment interest and a $1,000,000 penalty.
Banned from promoting crypto
In this case, the SEC determined that Kardashian was paid $250,000 to publish a post on her Instagram account about EMAX tokens. She has also been gagged from promoting any crypto 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 accused is said to have shared a link to the EthereumMax website directing investors on how to engage with the asset.
Celebrity crypto involvement
Furthermore, in a period when celebrities have come under criticism for promoting crypto projects without issuing warnings, the SEC pointed out that the Kardashian case should serve 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 added that the SEC determined Kardashian had violated the law and the penalties applied stem from the traditional finance sector in relation to the Securities Act. The chair also confirmed that other celebrities, including musician DJ Khaled and boxer Floyd Mayweather, had been charged previously for promoting crypto security tokens without full disclosure.
Lawsuit against Kardashian
The SEC charges come after a lawsuit was filed against Kardashian for promoting EMAX in what was termed as a bogus cryptocurrency. The case also targeted celebrities like Floyd Mayweather Jr and Paul Pierce.
“Defendants touted the prospects of the Company [EMAX] and the ability for investors to make significant returns due to the favorable ‘tokenomics‘ of the EMAX Tokens,” the complaint said.
Elsewhere, the UK regulator, the Financial Conduct Authority, slammed Kardashian for promoting crypto projects with the potential of putting investors at risk.
