Kim Kardashian is known to most people as a reality TV star rather than a financial advisor. The first job brought the 41-year-old celebrity and a lot of money. To be more precise: a fortune of around 1.8 billion dollars, as estimated by the US magazine Forbes. The second job of the financial expert, on the other hand, now costs her money.
Kardashian has to pay around $1.3 million to settle allegations by the US Securities and Exchange Commission (SEC) that she violated US regulations. She allegedly promoted a crypto token without disclosing that she was paid to promote it. For Kardashian, while $1.3 million is a small sum considering her wealth, the news itself is an embarrassment. And a warning to all of them influencerswho use their social media prominence for paid advertising but don’t disclose it clearly enough.
The SEC said Monday that Kardashian received $250,000 for promoting a crypto coin owned by Ethereum Max on her Instagram account. Kardashian has neither admitted nor denied the regulator’s allegations as part of the settlement. However, she has agreed to stop promoting digital assets for three years. Kardashian rose to fame with a TV show about her family’s everyday life. Part of her business model is to advertise all the products she uses as an advertising medium.
The SEC has already penalized other celebrities for crypto advertising
The SEC classifies cryptocurrencies as securities and had previously warned that celebrities promoting such must make it clear to investors if they are being paid to endorse them. In 2018, the regulator fined boxer Floyd Mayweather and music producer DJ Khaled.
“This case is a reminder that when a celebrity or influencer endorses investment opportunities, including crypto-asset securities, it doesn’t mean these investment products are suitable for all investors,” SEC Chief Executive Gary Gensler said in a statement Monday. “We encourage investors to consider the potential risks and rewards of an investment in light of their own financial goals.”
According to the SEC, Kardashian added the tag “#AD” at the end of the Instagram post in 2021. Even so, the SEC said investors were not informed that she was paid for the ad. A lawyer for the celebrity did not immediately respond to a request for comment from Bloomberg news agency.
Wall Street’s main regulator ruled some time ago that many virtual tokens are securities and fall under their jurisdiction. To determine whether something is a security, the SEC uses a legal test that dates back to a 1946 Supreme Court decision. Accordingly, an asset may fall under the jurisdiction of the SEC when investors deposit money with the intention of benefiting from the efforts of the organization’s leadership.