What does Kim Kardashian’s crypto settlement mean for celebrities?
The disclosure of a $1.26 million settlement between billionaire Kim Kardashian and the Securities and Exchange Commission (SEC) lit up crypto news sites on Monday morning.
The reality star and lawyer shilled a token called EthereumMax (EMAX) to her millions of Instagram followers last year — a cryptocurrency that has seen its price devalue 99% since her promotion.
- Kardashian settled with the SEC for failing to disclose her payment of $250,000 for the EthereumMax ad.
- By agreeing to pay $1 million in penalties and $260,000 for disgorgement, Kardashian neither admits or denies any wrongdoing.
- The settlement is roughly five times larger than what she was paid to display the Instagram story.
Unfortunately for EthereumMax co-promoters Paul Pierce and Floyd Mayweather, and co-founders of the project Steve Gentile and Giovanni Perone, Kardashian will “cooperate with the Commission’s ongoing investigation.” This may indicate that more shoes will drop.
Read more: No more crypto promos for Kim Kardashian, rules SEC
Kardashian’s settlement happens at an inconvenient time for the industry as whole — which is in the midst of a year long downturn — but is particularly inconvenient for Mayweather. The ex-boxer recently attempted to dismiss a class-action lawsuit brought against him for promoting EthereumMax. The odds of his dismissal succeeding just got significantly smaller.
The Instagram story posted by Kardashian included the typical “not financial advice” and “#ad” caveats, which have been enough in the past to skirt Federal Trade Commission (FTC) and SEC scrutiny. Apparently it wasn’t enough this time.
Kardashian bust bad news for big names
The past two years have seen a wave of A to D list celebrities pouring forth to endorse cryptocurrency projects, exchanges, and even outright scams.
- FTX has been promo’d by Tom Brady, Gisele Bündchen, and Larry David.
- Eminem, Jimmy Fallon, and Paris Hilton have shilled Bored Ape Yacht Club.
- Soulja Boy endorsed SaferMars, and Leslie David Baker (from The Office) promo’d StanleyToken.
The question is whether the Kardashian charge and settlement is meant as a shot across the bow to all celebrities making endorsements or the beginning of a new wave of charges.
Indeed, the SEC used the story’s attention as a chance to make clear its stance on celeb endorsements. Chairman Gary Gensler shared news of the settlement on Twitter as well as a video encouraging investors to be wary. The chairman also went on CNBC shortly after the announcement, breaking down the settlement and discussing the dangers of financial influencing.
Read more: Gary Gensler still backing the SEC to be the best crypto regulator
This isn’t the first time the SEC has brought charges against celebs for promoting crypto projects. DJ Khaled and Floyd Mayweather settled with the SEC in 2018 for promoting Centra — however, leveling charges against Kardashian seems grander in its scope, perhaps because of her immense wealth and social media influence.
The news will undoubtedly cause celebrities to give pause before endorsing crypto projects in the US, but it might also have broader effects for local crypto influencers. There are numerous individuals with large followings — such as BitBoy and Scott Melker — who have clearly broken the same kinds of disclosure expectations. Will they face similar charges?
Small fish in a big pond
The Kardashian family, worth several billion dollars combined, will obviously face no financial hardship or distress from this $1.26 million settlement with the SEC. It also appears that Kardashian’s involvement was minimal, only being a paid spokesman.
This has left people in the industry wondering when the SEC plans to, if ever, take on bigger fish they’d like to see brought to justice (ie: Do Kwon or 3AC).
In May, the SEC announced a doubling of its cryptocurrency and cyber enforcement teams. It could very well be that the Kardashian settlement isn’t simply a warning, but more a strong example of actions yet to come.
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