Kim Kardashian to pay $1.26M to settle SEC crypto charges

Kim Kardashian will pay $1.26 million to settle federal charges that she promoted a cryptocurrency without disclosing she was paid to do so, the Securities and Exchange Commission said Monday.

The SEC alleged that the celebrity billionaire and reality TV star used her Instagram account — followed by 331 million people — to tout EthereumMax’s token, EMAX, without disclosing that she was being given $250,000 in exchange. EMAX is a token built on the popular Ethereum blockchain. Its value has fallen by more than 99 percent since peaking in May 2021.

“Are you guys into crypto????” Kardashian wrote in a June 2021 post, according to the SEC’s order. “This is not financial advice but sharing what my friends just told me about the Ethereum Max token!”

Kardashian provided links to where potential investors could learn how to buy the digital currency. And while Kardashian did include “#AD” on the bottom of the post, the SEC said Kardashian should have disclosed that she had received compensation as well as the amount paid.

“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."

The case is the SEC’s most significant crypto enforcement action to date against a celebrity using their platform to promote the nascent industry. It's the latest example of Gensler's attempt to police what he has called a "wild west" market where startups and crypto boosters hawk lightly-regulated investment products. Gensler has said that most crypto tokens, including EMAX, are securities that fall under the SEC’s jurisdiction.

Kardashian lawyer Patrick Gibbs, a partner at the Cooley law firm, said in a statement that Kardashian is “pleased to have resolved this matter with the SEC." He added that the agreement allows her to “move forward with her many different business pursuits."

Kardashian cooperated with the SEC and “remains willing to do whatever she can to assist the SEC in this matter,” Gibbs said.

The 41-year-old Kardashian was just one of many celebrities who rushed into the crypto market as trading boomed in 2020 and 2021. A crash earlier this year wiped out more than $2 trillion in value.

Digital asset exchanges and brokerages spent hundreds of millions of dollars on celebrity endorsements, stadium naming rights deals and partnerships with popular name brands like Nike and the NBA during the market’s bull run. This strategy isn’t unique — traditional financial institutions and tech platforms also spend heavily on marketing — but the deluge of crypto advertisements triggered warnings from consumer advocates and investor protection groups.

The SEC has warned consumers about celebrities posting about investments online before, including in crypto and special purpose acquisition companies, or SPACs — another Covid-era investment craze. In 2018, hip-hop producer DJ Khaled and boxer Floyd Mayweather Jr. settled charges with the regulator for promoting investments in initial coin offerings.

EthereumMax pulled in several celebrity promoters. Mayweather reportedly wore a T-shirt with the token’s nameto a bitcoin conference in 2021, as EthereumMax was sponsoring a boxing match between Mayweather and YouTube star Logan Paul. In May 2021, former NBA star Paul Pierce tweeted that he “made more money with [EthereumMax] in the past month” than he did with ESPN in a year.

The SEC has not alleged any wrongdoing against Mayweather or Pierce. The regulator's investigation is ongoing.

Tyler Gellasch, a former SEC official who now leads the Healthy Markets Association, said the Kardashian settlement is "clearly intended to tamp down on the latest craze of celebrities going out — for their own profits — and promoting a digital asset."

“It seems clear that the SEC is trying to send a message to the social media influencer community to pump the brakes on these types of promotional deals," he said.