The American influencer and celebrity was accused by the SEC of advertising a cryptocurrency asset security without revealing to her followers the payments she received.
Kardashian was accused by the United States Securities and Exchange Commission (SEC) of “touting on social media a crypto asset security offered and sold by EthereumMax” without reporting the compensation she got for her promotional efforts.
In addition to agreeing to settle the allegations and paying $1.26 million in fines, disgorgement, and interest, Kardashian also committed to assist the SEC’s ongoing inquiries into the EthereumMax project.
The announcement mentioned that Kardashian had received a $250,000 payment to promote EMAX tokens on her Instagram page and link to the project’s website, but neglected to reveal it.
Kardashian broke the anti-touting rule of the federal securities laws according to the SEC’s ruling. This has historically been true of other well-known crypto securities violations with the SEC.
Kardashian agreed to settle the accusations but did not accept or deny the SEC’s findings. This was divided between a $1 million fine and a disgorgement of $260,000. In addition, Kardashian has pledged to refrain from endorsing any cryptocurrency assets until 2025.
Gary Gensler, the chairman of the SEC, also used the directive to urge the public to exercise caution when investing in digital assets and to remind public figures of their responsibility to report compensation for promoting securities.
“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. We encourage investors to consider an investment’s potential risks and opportunities in light of their own financial goals.”
A class-action lawsuit alleging that Kardashian and a few other well-known American social media influencers deceived investors through the social media advertising EthereumMax was served on them in January 2022.
Kardashian shared an Instagram story promoting the project in June 2021. Boxing legend Floyd Mayweather was also named in the lawsuit after he promoted the Ethereum-based token in the run-up to a celebrity boxing match against YouTuber Logan Paul at the same time.
The token, which skyrocketed after the marketing by Kardashian and other influencers, allowed fans to buy pay-per-view seats. The worth of EthereumMax plummeted afterward, leaving many out of pocket.