SEC charges Kim Kardashian for unlawfully touting crypto

[Hydrogen]

The top U.S. financial regulator has charged celebrity Kim Kardashian for touting a cryptocurrency on her Instagram account without disclosing that she was paid for the promotion.

The Securities and Exchange Commission said Monday Kardashian has agreed to pay a fine of $1 million, although she did not admit or deny the S.E.C.'s findings. She will also give back $260,000, which includes her payment from the company with interest.

"Ms. Kardashian's case also serves as 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," said SEC chair Gary Gensler.

Kardashian, who has around 330 million Instagram followers, was paid $250,000 to promote cryptocurrency offered by EthereumMax called EMAX tokens.

According to regulators, her post also "provided instructions for potential investors to purchase EMAX tokens." And that violates an "anti-touting provision" in the federal securities laws.

As the popularity of crypto has ballooned, companies have spent millions of dollars on marketing. Many of them have hired celebrities spokespersons, including comedian Larry David and actor Matt Damon, to promote their products. But after the value of Bitcoin and other digital currencies plummeted, many of them have been criticized for boosting them.

As more and more celebrities promote products online, regulators have started to take a closer look to make sure that they're following rules.

The Federal Trade Commission, for instance, has cracked down on celebrities and social media influencers who don't adequately disclose their connections or that they are paid by the products they promote.

Two years ago, the FTC fired off warning letters to several Internet influencers and celebrities, like the recording artists Cardi B and Jordin Sparks, reminding them of their legal obligation to disclose their connections to the products they promote.

While Kardashian didn't admit or deny the SEC's findings, in an agreement with the regulator, she agreed to not promote any crypto asset securities for three years.


https://www.npr.org/2022/10/03/1126526883/sec-charges-kim-kardashian-for-unlawfully-touting-crypto-on-her-instagram-accoun

....


I hadn't realized Kim Kardashian has 330 million folllowers on instagram.

There could be a twist to this case. If I remember correctly ethereum, upon which ethereum max was built, as an ERC-20 token. Wasn't classified a security until after it adopted proof of stake recently. Kim Kardashian promoted ETH max before the transition to proof of stake. Technically a claim could be made that Kim Kardashian did not promote a security, as eth's platform ran upon proof of work when Kim Kardashian promoted eth max.

The concept of disclosing cash and incentives to promote products, platforms or narratives is an interesting one. It is clear many youtubers and internet influencers publish sponsored content on behalf of advertisers. I have seen youtubers promote questionable programs claiming a person can legally become a Lord or Lady by purchasing 1 square foot of land in scotland. As well as other questionable content. Could society benefit from internet content creators being more forthcoming about what they're paid to promote?

Deregulation is my preference for business, finance and internet marketing. But surely there must be some way to promote good faith reporting of sponsors, without introducing tons of bureaucratic red tape to everything.

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[hatshepsut93]

There could be a twist to this case. If I remember correctly ethereum, upon which ethereum max was built, as an ERC-20 token. Wasn't classified a security until after it adopted proof of stake recently. Kim Kardashian promoted ETH max before the transition to proof of stake. Technically a claim could be made that Kim Kardashian did not promote a security, as eth's platform ran upon proof of work when Kim Kardashian promoted eth max.

Does this "anti-touting provision" concern only securities or other assets too?

The concept of disclosing cash and incentives to promote products, platforms or narratives is an interesting one. It is clear many youtubers and internet influencers publish sponsored content on behalf of advertisers. I have seen youtubers promote questionable programs claiming a person can legally become a Lord or Lady by purchasing 1 square foot of land in scotland. As well as other questionable content. Could society benefit from internet content creators being more forthcoming about what they're paid to promote?

I view it as similar to disclosing the ingredients on food products - the people should know this to make an informed decision.

Deregulation is my preference for business, finance and internet marketing. But surely there must be some way to promote good faith reporting of sponsors, without introducing tons of bureaucratic red tape to everything.

It's not like you need to obtain a license to become a social media influencer, and I doubt that officials would bother with going after every single influencer that didn't disclose payments for promotions, they'd go only after the biggest ones.

[Hydrogen]

Does this "anti-touting provision" concern only securities or other assets too?

I haven't heard of anyone being charged for being a paid bitcoin promoter.

Bitcoin was categorized as a commodity rather than a security, last I checked.

There were also no anti touting cases for ETH or ERC-20 tokens that I know of until after ETH switched to proof of stake and became categorized as a security.

ICOs did have anti touting after they were classified as securities and regulated by the SEC.

The legal side of things I can't comment on.

Precedents observed over the years, would appear to indicate securities are the main asset class that is affected.

[NeuroticFish]

There could be a twist to this case. If I remember correctly ethereum, upon which ethereum max was built, as an ERC-20 token. Wasn't classified a security until after it adopted proof of stake recently. Kim Kardashian promoted ETH max before the transition to proof of stake.

From what I know, some years ago the crypto coins were considered commodities, but the tokens were already seen as securities.
Also, since she agreed with this fine, there will be no lawsuit on the matter, which could touch this problem.

What I find more interesting is that, from what I've read, she was telling "it's not a financial advice" in that advert, still, it looks like that part was somehow ignored/downplayed, which is imho concerning.

[stompix]

From what I know, some years ago the crypto coins were considered commodities, but the tokens were already seen as securities.
Also, since she agreed with this fine, there will be no lawsuit on the matter, which could touch this problem.

I think she agreed with the fine because most likely she has now clue what's behind that and for a few hundred thousand dollars it's better to just let it slide, do a swimsuit promo and she'll get 10 times the fine back. The guy who regrets it is probably the one in charge of his social media accounts and maybe his manager as I doubt she knows what she's promoting there in 99% of the cases.

And that coin,  ETH max, for god's sake, who would agree to promote it if they would spend a second checking it ?

All-Time High   $0.000000597636 -99.2%
All-Time Low  $0.000000000297824 1574.8%

What I find more interesting is that, from what I've read, she was telling "it's not a financial advice" in that advert, still, it looks like that part was somehow ignored/downplayed, which is imho concerning.

It's about this thing:

https://www.ftc.gov/business-guidance/resources/ftcs-endorsement-guides-what-people-are-asking#about

When Does the FTC Act Apply to Endorsements?
I’m a blogger. I heard that every time I mention a product on my blog, I have to say whether I got it for free or paid for it myself. Is that true?

No. If you mention a product you paid for yourself, there isn’t an issue. Nor is it an issue if you get the product for free because a store is giving out free samples to its customers.
The FTC is only concerned about endorsements that are made on behalf of a sponsoring advertiser. For example, an endorsement would be covered by the FTC Act if an advertiser – or someone working for an advertiser – pays you or gives you something of value to mention a product.

[cheezcarls]

The top U.S. financial regulator has charged celebrity Kim Kardashian for touting a cryptocurrency on her Instagram account without disclosing that she was paid for the promotion.

The Securities and Exchange Commission said Monday Kardashian has agreed to pay a fine of $1 million, although she did not admit or deny the S.E.C.'s findings. She will also give back $260,000, which includes her payment from the company with interest.

"Ms. Kardashian's case also serves as 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," said SEC chair Gary Gensler.

Kardashian, who has around 330 million Instagram followers, was paid $250,000 to promote cryptocurrency offered by EthereumMax called EMAX tokens.

According to regulators, her post also "provided instructions for potential investors to purchase EMAX tokens." And that violates an "anti-touting provision" in the federal securities laws.

As the popularity of crypto has ballooned, companies have spent millions of dollars on marketing. Many of them have hired celebrities spokespersons, including comedian Larry David and actor Matt Damon, to promote their products. But after the value of Bitcoin and other digital currencies plummeted, many of them have been criticized for boosting them.

As more and more celebrities promote products online, regulators have started to take a closer look to make sure that they're following rules.

The Federal Trade Commission, for instance, has cracked down on celebrities and social media influencers who don't adequately disclose their connections or that they are paid by the products they promote.

Two years ago, the FTC fired off warning letters to several Internet influencers and celebrities, like the recording artists Cardi B and Jordin Sparks, reminding them of their legal obligation to disclose their connections to the products they promote.

While Kardashian didn't admit or deny the SEC's findings, in an agreement with the regulator, she agreed to not promote any crypto asset securities for three years.


https://www.npr.org/2022/10/03/1126526883/sec-charges-kim-kardashian-for-unlawfully-touting-crypto-on-her-instagram-accoun

....


I hadn't realized Kim Kardashian has 330 million folllowers on instagram.

There could be a twist to this case. If I remember correctly ethereum, upon which ethereum max was built, as an ERC-20 token. Wasn't classified a security until after it adopted proof of stake recently. Kim Kardashian promoted ETH max before the transition to proof of stake. Technically a claim could be made that Kim Kardashian did not promote a security, as eth's platform ran upon proof of work when Kim Kardashian promoted eth max.

The concept of disclosing cash and incentives to promote products, platforms or narratives is an interesting one. It is clear many youtubers and internet influencers publish sponsored content on behalf of advertisers. I have seen youtubers promote questionable programs claiming a person can legally become a Lord or Lady by purchasing 1 square foot of land in scotland. As well as other questionable content. Could society benefit from internet content creators being more forthcoming about what they're paid to promote?

Deregulation is my preference for business, finance and internet marketing. But surely there must be some way to promote good faith reporting of sponsors, without introducing tons of bureaucratic red tape to everything.

About the last statement though regarding that she agreed not to promote any crypto asset for 3 years, does NFTs count? And what if she just recording a video visiting the NFT booths? Would that still be considered as promotion? Or maybe “indirect” promotion that still counts in her “sentence” of not promoting for 3 years?

I imagine that it would be hard living as an influencer in the US due to cracking down on this kind of stuff for those with a huge following. But yeah she should have disclosed it though to avoid paying the fine.

[Zlantann]

The concept of disclosing cash and incentives to promote products, platforms or narratives is an interesting one. It is clear many youtubers and internet influencers publish sponsored content on behalf of advertisers. I have seen youtubers promote questionable programs claiming a person can legally become a Lord or Lady by purchasing 1 square foot of land in scotland. As well as other questionable content. Could society benefit from internet content creators being more forthcoming about what they're paid to promote?

The US Securities and Exchange Commission might be taking this matter to the extreme which might really affect the privacy and income of influencers but I think there should be checks and balance system. Allowing these influencers to promote any kind of business or investment might lead to an increase in followers losing their funds to scammers. In my country, we have seen celebrities with huge followers promote some shitcoins that turned out to be scams. Sometimes these influencers are only concerned with the financial benefit they would derive from the advert, with less or no concern about the authenticity of the business. They should have some level of responsibility regarding the kind of products they promote because they are role models.    

[Lucius]

I hadn't realized Kim Kardashian has 330 million folllowers on instagram.

Having 330 million followers does not mean being intelligent enough to understand that promoting such things will backfire sooner or later. The one who used her for this job was obviously looking for some mega Instagram star, and apparently the whole operation paid off for them as a client, but it looks like Kim will have to find a new financial advisor for cryptocurrencies.

[Gyfts]

Deregulation is my preference for business, finance and internet marketing. But surely there must be some way to promote good faith reporting of sponsors, without introducing tons of bureaucratic red tape to everything.

This is my personal preference as well though the ad disclosure space seems like the wild west. Is it actually required that someone displaying an advertisement explicitly say they are financially compensated for said ad? I don't really think so.

If someone suspects a conflict of interest, I figure it would be the consumer to immediately assume there is one unless explicitly stated otherwise.

[bittraffic]

I imagine that it would be hard living as an influencer in the US due to cracking down on this kind of stuff for those with a huge following. But yeah she should have disclosed it though to avoid paying the fine.

She is willing to disclose information, it was on TV the other day. She must have an advisor, telling her she can't just get away when SEC gets involved.
But she will be an example of what influencers are going to face sooner. Famous stars are always going to be the first to be noticed, she'd be whacked like McAfee if she is not going to cooperate.

[Obito]

It seems to me that Kim didn't think enough about how she can promote the product, maybe there's a miscommunication about when or if she can finally promote it, documents and agreements can be like that sometimes. I think it's not a big deal but I am sure that Kim's side will see some problem nonetheless.

[kryptqnick]

Advertising must be disclosed, one way or another. It should be clearly understandable that something is a promoted material, not someone's personal opinion and desire to share it with others. It shouldn't only be related to what is considered securities in the US, though.
The fine was perhaps too small considering the fortune of Kim Kardashian is 1.8 billion dollars, but it's good that she was accused and had to pay. I think her team perhaps also did a good job of covering it up. While it's only a few days old, if you look at news in Google when typing Kim Kardashian, it gives you sets of news about sections. The first is Kardashian and Kanye West, then about her and Pete Davidson, then about her not knowing what a tortellini is, and only then comes the 'fined by SEC' section.

[justdimin]

The US Securities and Exchange Commission might be taking this matter to the extreme which might really affect the privacy and income of influencers but I think there should be checks and balance system. Allowing these influencers to promote any kind of business or investment might lead to an increase in followers losing their funds to scammers. In my country, we have seen celebrities with huge followers promote some shitcoins that turned out to be scams. Sometimes these influencers are only concerned with the financial benefit they would derive from the advert, with less or no concern about the authenticity of the business. They should have some level of responsibility regarding the kind of products they promote because they are role models.    

That is exactly what they are trying to prevent. Just because you are an influencer doesn't mean that you should be able to get some money and then promote anything you want. This isn't just for crypto, like they can't just promote a cream that is not actually doing what it claims to do, or not publish that they got paid for it, they need to do that too and that's the problem.

This is why it is to make sure people are aware that they are getting screwed in the same way all the time and if Kim Kardashian got paid, then it is a good reason to understand it wasn't because she liked it or promotes it, she just got paid and maybe less people would invest.

[cabron]

The US Securities and Exchange Commission might be taking this matter to the extreme which might really affect the privacy and income of influencers but I think there should be checks and balance system. Allowing these influencers to promote any kind of business or investment might lead to an increase in followers losing their funds to scammers. In my country, we have seen celebrities with huge followers promote some shitcoins that turned out to be scams. Sometimes these influencers are only concerned with the financial benefit they would derive from the advert, with less or no concern about the authenticity of the business. They should have some level of responsibility regarding the kind of products they promote because they are role models.    

That is exactly what they are trying to prevent. Just because you are an influencer doesn't mean that you should be able to get some money and then promote anything you want. This isn't just for crypto, like they can't just promote a cream that is not actually doing what it claims to do, or not publish that they got paid for it, they need to do that too and that's the problem.

This is why it is to make sure people are aware that they are getting screwed in the same way all the time and if Kim Kardashian got paid, then it is a good reason to understand it wasn't because she liked it or promotes it, she just got paid and maybe less people would invest.

It seem very targeted though and some are saying this is political because Kanye West the ex husband of Kim, will run for president again. We can say its just too early for talks about election but they're shutting him already before BLM makes him win. Kim is under circumstances where she has to do something for politics or else the crypto issue will get worse but this is probably just a conspiracy theory.

If the shitcoin just didn't turned out to be scam but just something like SHIB, she could get away.

[The Sceptical Chymist]

I hadn't realized Kim Kardashian has 330 million folllowers on instagram.

That's roughly the entire population of the United States if I'm not mistaken--but I have to wonder how many of those followers were paid for (for whatever reason) or otherwise represent genuine fans of hers.  I don't know much about her, as I'm not that into modern pop culture, but she's basically famous for being famous, right?  Sort of like Paris Hilton?  In any case, I'm sure she does have a lot of real followers, but whatever.  With Instagram or Twitter, you can follow anyone and it doesn't mean that much.

It is clear many youtubers and internet influencers publish sponsored content on behalf of advertisers. I have seen youtubers promote questionable programs claiming a person can legally become a Lord or Lady by purchasing 1 square foot of land in scotland.

Yeah, I've been seeing quite a few Youtubers shilling that scheme.  It's pretty obvious that those Youtubers are being paid, and if it wasn't already then most if not all of them tell you that they're being sponsored by this or that.

I didn't see what KK's Instagram shilling looked like (and I've never used that site), but I would think it might be much less obvious when someone is being paid to promote something.  I could be wrong, but on Youtube it seems very transparent.

Look at all these fines the government is handing out, eh?  I'm not saying they're wrong in doing so, but it seems like they're cracking down on people and/or institutions that they probably wouldn't have a year or two ago.  I see that as a sign the country realizes it's going broke and needs to do a little fundraising (lol).

[samcrypto]

It seems to me that Kim didn't think enough about how she can promote the product, maybe there's a miscommunication about when or if she can finally promote it, documents and agreements can be like that sometimes. I think it's not a big deal but I am sure that Kim's side will see some problem nonetheless.

This must be on a legal team of Kim since we all know, those celebrities are always working under contract and for that to happen, the legal team should review first before getting into that kind of promotions. Well, Kim has to settle this with big amount and I think this issue is also a lesson to many celebrities that don't promote any project easily especially if you are not familiar with that project because it can turn into a scam project and you might be on a big trouble later on by promoting such project.

[Scripture]

It seems to me that Kim didn't think enough about how she can promote the product, maybe there's a miscommunication about when or if she can finally promote it, documents and agreements can be like that sometimes. I think it's not a big deal but I am sure that Kim's side will see some problem nonetheless.

This must be on a legal team of Kim since we all know, those celebrities are always working under contract and for that to happen, the legal team should review first before getting into that kind of promotions. Well, Kim has to settle this with big amount and I think this issue is also a lesson to many celebrities that don't promote any project easily especially if you are not familiar with that project because it can turn into a scam project and you might be on a big trouble later on by promoting such project.

I agree on this, why her legal team didn't disclose any when in fact they should fully aware about the law especially with SEC since cryptocurrency are quiet the trend recently and SEC actively monitoring it. That may be a small amount of money for her but still, the case has serve and she should be more careful next time. She's very influential, having that huge of followers can really affect one's live, so she better be careful on sharing any projects next time.