Reality TV star Kim Kardashian has been charged $1.26m by the US securities regulator after she failed to disclose a payment for promoting a cryptocurrency product.
The Securities and Exchange Commission (SEC) announced yesterday that Kardashian had agreed to settle the charges and cooperate with the investigation.
The regulator claimed she failed to disclose a $250,000 payment from crypto firm EthereumMax to publish a post on her Instagram account about its EMAX tokens.
Kardashian agreed to pay the charge without admitting or denying the regulator’s findings. However, the SEC argued that when celebrities fail to disclose compensation they receive in return for promoting such products, investors can be left in the dark.
“This case is a reminder that, when celebrities or influencers endorse investment opportunities, including crypto asset securities, it doesn’t mean that those investment products are right for all investors,” said SEC chair Gary Gensler. “We encourage investors to consider an investment’s potential risks and opportunities in light of their own financial goals.”
Investment fraud is one of the highest-grossing cybercrime types investigated by the FBI, making scammers over $1.4bn last year. Often, fraudsters use the likeness of celebrities to promote such scams, especially in the cryptocurrency space.
Sometimes celebrity social media accounts are also hijacked by fraudsters to facilitate pump-and-dump and other illegal schemes.
Anne Rose, co-lead of the blockchain group at law firm Mishcon de Reya, said there are strict guidelines regarding the promotion of products online to protect investors.
“Given this case involves both a celebrity receiving payment for an undisclosed endorsement and a high-profile cryptocurrency, it’s not surprising that the US SEC has taken this action,” she added.
“US authorities are cracking down on crypto ‘pump-and-dump’ schemes and this decision will be welcomed by many seeking to ensure appropriate consumer protection in the crypto space.”