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The crypto industry continues to be largely unregulated, and that has led to all kinds of risks for the casual investor. To cut down on potential scams and pump-and-dump schemes by bad actors, the SEC just made an example of celebrity influencer Kim Kardashian. Without admitting any wrongdoing, Kardashian is paying a fine of $1.26 million to the SEC to settle a case involving an Instagram post promoting the EthereumMax cryptocurrency. Kardashian has also agreed not to promote anything crypto-related for a period of at least 3 years.
What did Kardashian actually do wrong?
In many ways, Kardashian is no different than any other social media influencer talking up their favorite cryptos. The only difference, of course, is that Kardashian got paid $250,000 for promoting EthereumMax to her 328 million followers on Instagram back in June 2021. Kardashian obviously thought she was doing nothing wrong, because she even put the hashtag #ad on her Instagram story and told people in advance, “This is not financial advice.”
The problem is that the SEC holds people to a much higher standard if they are promoting securities, and the SEC obviously believes that EthereumMax is a security (and not a cryptocurrency, which it does not have jurisdiction over, but that’s a story for another time). According to the Securities Act of 1933, any promoter of a security must disclose how much they are getting paid for their promotion – something that Kardashian did not do. Theoretically, Kardashian should have added the following hashtag to her Instagram post: #IJustGotPaid$250KForThis.
How is Kardashian different from any other celebrity?
Even if you’re not a big Kardashian fan, you’re probably shaking your head. There are plenty of other celebrities out there – including both Matt Damon and Tom Brady – who have shilled for cryptocurrency companies in the past year. This year’s Super Bowl, in fact, was also known as the Crypto Bowl, due to all the crypto ads appearing during the game. So are you telling me that all of this is also under the purview of the SEC? The SEC is essentially giving itself the right to go after anyone it thinks has run afoul of the Securities Act of 1933 at any time.
That’s why I think the SEC is just making an example of Kardashian. She’s a high-profile celebrity influencer and she got caught shilling for what appears to be a completely worthless crypto. EthereumMax is currently trading for $0.000000004677, while the “real” Ethereum is trading for more than $1,200. What if somebody had invested his or her life’s savings in a crypto that sounded like a real crypto, but wasn’t? Going forward, people are going to be very careful about what they promote on social media. It looks like Kim Kardashian lost a cool $1 million on her little indiscretion.
Keeping up with the crypto Kardashians
At the end of the day, though, Kardashian might end up saving the crypto industry. If her example can help to cut down on the scams and frauds routinely taking place within the crypto industry, that might make crypto a much safer place to invest. At the very least, she might convince people that taking crypto investment advice from a known social media influencer is probably not the smartest thing you can do these days.
