Kim Kardashian is in hot water over an Instagram post she made about cryptocurrency in June 2021. On Monday, October 3, 2022, the Securities and Exchange Commission charged The Kardashians star with a penalty of $1.26 million for unlawful crypto touting.
Touting is a common practice in which an individual or a company persuades others to buy or invest in specific services or goods by addressing them directly. As a result, crypto touting refers to the promotion of specific cryptocurrencies or digital tokens.
The following section will explore more details related to the charges against Kim Kardashian regarding the unlawful touting of cryptocurrency.
Kim Kardashian fails to disclose the payment for crypto promotion and gets penalized for $1.26 million
According to SEC charges, Kim Kardashian posted a promotional post about crypto assets, EMAX tokens, which are offered and sold by EthereumMax. She did not, however, disclose the payment she received for promoting the aforementioned crypto assets, which violates a federal securities laws anti-touting provision.
Hence, the Securities and Exchange Commission penalized the 41-year-old media personality and businesswoman with a $1.26 million fine. Because Kardashian allegedly received $250,000 for the promotional post, the amount included $1 million in penalties as well as $260,000 in interest and disgorgement.
According to SEC's press release, Kardashian has agreed to pay the amount as a settlement without accepting or denying the charges. Furthermore, the SEC has also directed Kardashian to cooperate while an investigation regarding the matter is active.
The press release referred to SEC Chair Gary Gensler's statement, which read in part:
"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."
In his statement, the SEC Chair mentioned the importance of disclosing promotional payments and added:
"Ms. Kardashian's case also serves as a reminder to celebrities and others that the law requires them to disclose to the public when and how much they are paid to promote investing in securities."
Apart from Gary Gensler, Gurbir S. Grewal, Director of the SEC's Division of Enforcement, was also quoted in the press release as saying:
"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. Investors are entitled to know whether the publicity of a security is unbiased, and Ms. Kardashian failed to disclose this information."
Kim Kardashian's case was not the first instance when a high-profile celebrity was penalized by the SEC for unlawful touting. In 2018, former professional boxer Floyd Mayweather Jr. and music producer Khaled Mohammed Khaled (popularly known as DJ Khaled) were charged for failing to disclose payments related to the promotion of investments in ICOs.
The investigation regarding the entire fiasco surrounding Kim Kardashian's promotional Instagram post is underway, with officials from Enforcement Division's Crypto Assets and Cyber Unit and New York Regional Office involved in the case.
Interestingly, according to a Business Insider report, crypto tokens promoted by Kim Kardashian in June 2021 have dropped by nearly 95%.