Kim Kardashian has been hit with a $1.26m penalty for promoting crypto currency EthereumMax on social media without revealing she had been paid to do so.
US federal regulators have charged the reality TV star after she promoted crypto asset security EMAX tokens on Instagram, without revealing that she was paid $250,000 by EthereumMax.
Kardashian agreed to settle charges with the Securities and Exchange Commission and pay the hefty fee, disgorgement, and interest, as well as working with the regulator’s ongoing investigation.
The post in question featured a link to EthereumMax’s website, including instructions for potential investors to purchase EMAX tokens.
It read: ““Are you guys into crypto???? This is not financial advice but sharing what my friends just told me about the Ethereum Max [sic] token!” The post also featured a hashtag “#ad”.
Kardashian has agreed to not promote any crypto asset securities for three years, although the star did not admit or deny the SEC’s findings.
The charge included approximately $260,000 in disgorgement, which represents Kardashian’s promotional payment, plus prejudgment interest, and a $1,000,000 penalty.
Potential investors were encouraged to consider an investment’s potential risks and opportunities in light of their own financial goals,” despite celebrity endorsements, SEC chair Gary Gensler advised on Monday.
The penalty was also “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,” he added.
Under federal securities legislation, celebrities must disclose the nature, source, and amount of compensation received in exchange for the promotion of a crypto asset security.
“This is a severe dressing down both financially and in terms of reputation for the Queen of reality TV who has agreed not to promote any crypto asset securities for three years,” Susannah Streeter, senior investment and markets analyst for Hargreaves Lansdown, said.
“Regulators are clearly horrified at the damage superstar celebrities can do to the bank balances of vulnerable consumers, who are influenced by almost every move they make,” Streeter added.
“The delusions of quick riches can spread far too rapidly on social media with speculation amplified by reposts by millions of followers,” she said.
In January, Kardashian and boxer Floyd Mayweather were sued by investors, after being accused of artificially inflating the coin’s price through misleading social media posts.
The price of Ethereum Max crashed by 98 per cent after Kardashian promoted it to her 228m Instagram followers.
Closer to home, the UK’s financial watchdog has also previously warned investors to not take cryptocurrency advice from social media influencers and celebrities, name-checking Kardashian.
“Social media influencers are routinely paid by scammers to help them pump and dump new tokens on the back of pure speculation,” the Financial Conduct Authority’s former chair Charles Randell said last year.
“Some influencers promote coins that turn out simply not to exist at all,” he said at the Cambridge international symposium on economic crime.