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Kim Kardashian to pay $1.26 million after being accused of ‘illegally designated’ cryptocurrency

Kim Kardashian is paying $1.26 million in a settlement with the Securities and Exchange Commission over allegations that she illegally promoted a cryptocurrency without disclosing that she was paid for the promotion.

Kardashian is paying the settlement without admitting or denying the SEC’s findings, the agency said Monday. She also agreed not to market any crypto-asset securities for three years.

The bot is linked to a cryptocurrency called EthereumMax, or EMAX, which was pitched to investors as a disruptive new cryptocurrency. Kardashian was one of several celebrities, along with boxer Floyd Mayweather and former NBA star Paul Pierce, who used their fame to hype the crypto asset and who were focus of a class action in January over their endorsements.

“This case is a reminder that when celebrities or influencers endorse investment opportunities, including securities in cryptoassets, that does not mean those investment products are right for all investors,”[ads1]; SEC Chairman Gary Gensler said in a statement.

EMAX’s declining value

EMAX launched last May with an initial trading volume of $16.1 million, according to data from CoinMarketCap. That number grew after social media posts by Kardashian and Pierce as well as incentives from Mayweather — who signed boxing gloves, ringside tickets and discounts to those who bought fight tickets online with EMAX tokens — the suit alleged. At one point, EMAX’s trading volume grew to nearly $108 million.

The creators of the digital coin – Steve Gentile of Connecticut and Giovanni Perone of Florida – sold their holdings of EthereumMax “for a substantial profit” as hype around the currency swelled, according to the suit.

EMAX’s price fell 3.3% on Monday morning to the equivalent of 0.000000004246 cents, according to CoinMarketCap.

At the time she promoted EMAX, Kardashian had approximately 225 million followers on Instagram, according to the securities regulator.

“Kardashian promoted a crypto-asset security on her Instagram account in exchange for financial payment from the issuer,” the SEC said in a legal filing.

The agency said Kardashian will cooperate in the ongoing investigation.

Reveal their payday

Suing celebrities who endorse products has historically proven difficult because lawyers must prove that the person has made money illegally. In Kardashian’s case, the SEC said she failed to disclose that she was paid $250,000 to publish a post on her Instagram account about EMAX tokens. Kardashian’s post also contained a link to the EthereumMax website, which provided instructions for potential investors to purchase EMAX tokens.

“The federal securities laws are clear that any celebrity or other person promoting a cryptoasset security must disclose the nature, source and amount of compensation they received in exchange for the promotion,” said Gurbir Grewal, director of the SEC’s Division of Enforcement. in a prepared statement.

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The SEC said Kardashian’s settlement includes about $260,000 in disgorgement, which covers the amount she earned from marketing the cryptocurrency plus interest, as well as a $1 million penalty.

Kardashian is not the first celebrity to attract the attention of regulators for their involvement in cryptocurrency. In 2018, the agency settled charges against Mayweather and music producer DJ Khaled for failing to disclose payments they received to promote digital currency investments.

The Associated Press contributed to this report.

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