Roughly 9 months ago, we briefly touched on a lawsuit which had been filed against various celebrities and athletes accused of promoting unregistered securities. The product being promoted was known as ‘EthereumMax (EMAX), and has long since faded into obscurity. This has not dissuaded regulators from holding the individuals behind said endorsements accountable however, with the Securities and Exchange Commission (SEC) announcing today that it has charged Kim Kardashian with ‘unlawfully touting a crypto security'.
Where much of the issue lay, is the fact that Kardashian failed to disclose to the public that she was paid $250,000 to promote the project. This simple disclosure is one required by what the SEC calls the ‘anti-touting provision' of federal securities law. As a result, by pushing her followers to the EthereumMax website and essentially endorsing the project, Kardashian has been forced to pay $1.26M.
In addition to paying the aforementioned fine, do not expect for Kardashian to be present in the world of digital assets for some time, as part of her agreement with the SEC will see her barred from promoting any such asset for 3 years.
A Stark Warning
Following the announcement of the charges levied against Kardashian, SEC Chairman Gary Gensler took to twitter with a start warning for retail investors.
“Celebrity endorsements don't mean that a product is right for you or even, frankly, that it's legitimate”
Today @SECGov, we charged Kim Kardashian for unlawfully touting a crypto security.
This case is a reminder that, when celebrities / influencers endorse investment opps, including crypto asset securities, it doesn’t mean those investment products are right for all investors.
— Gary Gensler (@GaryGensler) October 3, 2022
In the message, Gensler attempts to make what should already be obvious as clear as can be – Celebrities are not financial specialists, and their goals/incentives will very rarely align with that of the average investor.
Lather, Rinse, Repeat
If the aforementioned events involving Kim Kardashian sound familiar, that is because this is not the first time the SEC has attempted to hold celebrities accountable for their actions when digital assets are involved. Over the past few years, we have seen individuals ranging pseudo-celebrities like DJ Khalid, to GOAT athletes like Floyd Mayweather, each come to their own settlements.
With the ability afforded by social media to instantly reach millions, it has become increasingly each for those with influence to push their own agendas. This has also made it easier for them to slip up and find themselves in breach of regulations if not careful. The real issue arises however, when retail investors are easily swayed by those touting lavish lifestyles. Hopefully, these continued actions by the SEC will dissuade other celebrities from pushing questionable projects just because they were paid to do so.