Kim Kardashian, the reality TV actress and businesswoman, has been fined $1 million for advertising a cryptocurrency security on Instagram without properly revealing that she was paid to do so. Kardashian will also have to repay the $250,000 she earned for writing a piece regarding EthereumMax tokens, plus interest. Furthermore, she is barred from promoting any crypto asset securities for three years.
Kardashian has a big Instagram following, with millions of followers. As of October 4, she has 331 million followers. She had 220 million followers when she posted about cryptocurrency in June of last year.
“Are you guys into crypto????” she had asked, accompanied with a link to the EthereumMax website, where investors could buy EMAX coins. “Sharing what my friends just informed me about the EthereumMax token!” the tweet continued, and it added the hashtag ‘#ad’ to indicate it was a sponsored advertisement.
The US Securities and Exchange Commission (SEC) penalised her on October 3 for breaking a regulation that compels celebrities to declare to the public “the kind, source, and amount of money” they receive to advocate investment in securities.
“This prosecution serves as a reminder that just because celebrities or influencers support investment options, including crypto asset securities, that doesn’t guarantee those investment products are suited for all investors,” SEC Chair Gary Gensler stated. “We advise investors to assess the possible risks and possibilities of an investment in light of their personal financial goals.”
Kardashian agreed to pay the fee but refused to confirm or refute the SEC’s conclusions. According to her lawyer, the reality TV star “wanted to putting this incident behind her in order to prevent a lengthy lawsuit.”
“The arrangement she negotiated with the SEC permits her to do so, allowing her to continue forward with her many various business activities,” the lawyer stated.
Because the crypto sector is unregulated and little understood, celebrities promoting it run the danger of luring investors into scams they don’t fully understand.
In the United States, the Securities and Exchange Commission (SEC) states that “persons making these endorsements may also be liable for potential violations of the anti-fraud provisions of the federal securities laws, for participating in an unregistered offer and sale of securities, and for acting as unregistered brokers.”
In India, the Advertising Standards Council of India issued rules in February to promote virtual digital assets (VDA). These require that all advertisements for VDA goods and exchanges include a visible and unmistakable notice that “Crypto products and NFTs are unregulated and can be very dangerous.” There may be no regulatory remedy for any losses incurred as a result of such transactions.”
