The Securities and Exchange Commission (SEC) announced on Monday that the queen of influencers did a little too much influencing when it came to the EthereumMax (EMAX) token, which Kardashian promoted on her Instagram in June 2021. She’s agreed to pay $1.26 million and not promote crypto securities for the next three years.
The settlement shows that the SEC is ready, willing, and able to go after celebrity crypto endorsers. Many of them made plenty of money promoting what ended up being shady crypto schemes that quickly collapsed, leaving investors (often their own fans) with empty pockets.
SEC chair Gary Gensler did a little social media influencing of his own, announcing the settlement with a tweet that included a video of him warning people about celebrity endorsements of investments.
A lot of crazy things happened in crypto last year. From price jumps of over 5,000% that made people into crypto millionaires overnight to headline-grabbing scams and everything in between, it felt like anything could happen in the crypto world. But now some of those crypto chickens are coming home to roost, as celebrity influencer Kim Kardashian is discovering the hard way.
Kim Kardashian’s $1.26 million fine
The SEC charged the prominent socialite and media personality for posting about EthereumMax (EMAX) without telling her followers that she’d been paid for the promotion. In June last year, Kardashian shared the following on Instagram: “Are you guys into crypto???? This is not financial advice but sharing what my friends just told me about the EthereumMax token!”
The text did contain the hashtag #AD, but according to the SEC charges, celebs need to be more transparent. In a press release announcing the charges, SEC Chair Gary Gensler said, “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.”
Kardashian will pay a total of $1.26 million — a $1 million fine plus the $250,000 fee she received, along with interest. She is not allowed to promote any cryptocurrencies for the next three years and has agreed to cooperate with the investigation. Kardashian has not admitted any wrongdoing and a statement from her lawyer said that the superstar wanted to put the matter behind her and avoid a “protracted dispute.”
EthereumMax — not to be confused with Ethereum (ETH) or Ethereum Classic (ETC) — says it set out to mix the popularity of a meme token with the utility of a more serious token. As we pointed out last June, the project raises a lot of red flags. Some, such as the lack of a whitepaper, have since been resolved. Even so, the project has struggled to gain traction since its launch and questions remain about its long-term viability.
EthereumMax is currently trading at over 99.5% less than its all-time high, according to CoinMarketCap data. The token spiked in value in May and June last year on the back of celebrity endorsements, including Kardashian’s. Kardashian wasn’t the only celeb to support EthereumMax. Former boxer Floyd Mayweather and former NBA player Paul Pierce also jumped on the EMAX bandwagon. Mayweather went so far as to promise to accept EMAX as payment for a boxing match.
Do your own research
When Kardashian posted about EthereumMax, we were approaching the height of last year’s crypto craziness. New investors could be forgiven for thinking they could do no wrong, as crypto project after crypto project soared. EMAX itself shot up over 2,000% in a matter of weeks. However, buying crypto because a celebrity promoted it on social media is unlikely to end well.
Only you know your financial situation, but it’s likely to be quite different from that of Kim Kardashian. You will have different financial goals, a different appetite for risk, and different amounts of investable money. This is your money we’re talking about. Before you buy crypto or any other type of investment, do your own research and understand how it fits with your financial situation.
In terms of crypto, look at the whitepaper, the management team, the number of tokens there are and how they are distributed. Think about whether the project has utility, how it will generate money, and how it compares to its competitors. See whether it’s listed on any top crypto exchanges and how active the community is on social media. There are no guarantees, but solid projects are more likely to survive a crypto winter and potentially perform well in the coming decade or more.
The Bottom Line
The SEC’s announcement reignited a debate over the SEC should interfere in the crypto world, because the assets are technically classified as commodities instead of securities and spurred concern by some Twitter users that the regulator is targeting small fish instead of financial giants. It also suggests the SEC may put on its radar more celebrities who have promoted crypto