One of the benefits of becoming an influencer on social media platforms is the opportunity to get paid when endorsing something.
Kim Kardashian is the American media personality, socialite, and TV star. She's also a businesswoman, and one of the most famous influencers on social media.
For Kim, endorsing something is very common, since many brands have partnered with her in the past.
But in one particular endorsement, Kim has to pay more than what she earned.
According to the U.S. Securities and Exchange Commission (SEC), Kim has to pay $1.3 million for touting a product without disclosing the compensation.
Simply put, the SEC is imposing a fine because Kim failed to disclose how much she was paid.
The product Kim Kardashian was endorsing, was the EthereumMax (EMAX), a token that has no relation to the popular Ethereum.
"Are you guys into crypto????" she asked.
The post, which featured the hashtag #ad, included a link to the EthereumMax website, which gives users instructions about how to buy the tokens.
The reality TV star was paid $250,000 to promote the token to her Instagram Story back in June 2021.
According to the SEC, the reality star and influencer ran afoul of a 1930s securities law that says people touting investments must disclose if they're paid to do so, and say specifically how much they were paid.
Kim responded, and didn’t admit or deny the regulator’s allegations as part of the settlement.
But still, she agreed to pay the sum to settle the case.
SEC chairman Gary Gensler announcing the settlement with a tweet that included a video of him warning people about celebrity endorsements of investments.
"Kardashian fully cooperated with the SEC from the very beginning and she remains willing to do whatever she can to assist the SEC in this matter," said Kim's lawyer.
"She wanted to get this matter behind her to avoid a protracted dispute. The agreement she reached with the SEC allows her to do that so that she can move forward with her many different business pursuits."
Gary created the tweet as a warning.
"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."
This happens because Kim is far from the first celebrity who has been rebuked for promoting EMAX.
Before Kim, cryptocurrency investors have sued boxing legend Floyd Mayweather and basketball Hall-of-Famer Paul Pierce as well as Kim in January, by filing a lawsuit that alleged the three celebrities tricked followers and fans into buying the token before it plummeted 98% in value.
In February, another class-action lawsuit accused celebrities including YouTuber Jake Paul, rappers Lil Yachty and Soulja Boy, and former Backstreet Boys member Nick Carter of promoting SafeMoon as part of a pump-and-dump scheme.
Realizing how big influencers' can influence people, the SEC has made it clear that the agency wants to fix the loosely regulated and highly volatile world of cryptocurrency investments.
Today @SECGov, we charged Kim Kardashian for unlawfully touting a crypto security.
This case is a reminder that, when celebrities / influencers endorse investment opps, including crypto asset securities, it doesn’t mean those investment products are right for all investors.— Gary Gensler (@GaryGensler) October 3, 2022
SEC knows the delusions of quick riches can spread quickly on social media platforms, and influencers are only there to put gasoline to the fire by amplifying the message to their millions of followers.
In turn, the volatile nature of cryptocurrencies can damage the finances of vulnerable consumers who are influenced by those influencers.
And in this case, EMAX's price was plummeting, and it reached Kim to endorse it to give it a boost.
At the time, EMAX was struggling, and it was trying to rebound its price removing its assets from circulation, which could increase the value of those remaining.
This pump-up-the-price of the cryptocurrency is like a stock buyback in the traditional financial market. But instead of buying the tokens from the open market, EMAX burned them.
[~440 TRILLION] FOUNDER COINS BURNED
We've decided to do something big.
An $eMax coin burn means that 50% of ALL founders' tokens are now permanently removed from the $eMax circulation.
On paper, it means we're burning hundreds of millions of $, it means we're in this together pic.twitter.com/ZMYfOwpVQw— EthereumMax ✪ (@ethereum_max) June 14, 2021
Unfortunately for EMAX, things haven’t exactly worked out great since Kardashian’s post, because EMAX has plunged 97% since then.
The token went down to $0 and has never really gained real momentum after that time.
In other words, EMAX deliberately failed to to deliver its promises to "disrupt history."
And this SEC's settlement with Kim is the first sign that the regulator is cracking down on celebrities accused of taking part in those sorts of schemes.
For Kim, $1.2 million may not matter much, considering that the celebrity is worth around $2 billion. But still, the settlement is a symbolic value to all that listens. This shows that the SEC isn't afraid to crack down the scheme, and go after some of the biggest celebrities in the world.
"Ms. Kardashian is pleased to have resolved this matter with the SEC," said Kim's lawyer Patrick Gibbs.
