Why Kim won’t be the one suffering for her crypto touting
Despite paying the SEC $1.26 million for an undisclosed Instagram ad, Kim Kardashian’s hefty fine is nothing compared to the impacts on those she scammed.
Kim Kardashian has been forced to pay $1.2 million to the Securities and Exchange Commission for an undisclosed promotion of EMAX tokens, a crypto asset by EthereumMax.
While the name might sound familiar, the asset Kardashian promoted on her Instagram stories is not the second largest cryptocurrency on the market, Ethereum, but a token derived from it.
That token is now trading at £0.0000000044.
Celebrities endorsements of crypto are nothing new. Neither are their promotions of financially dubious product. But Wall Street regulators have placed mounting pressure on individuals to disclose their payment for such endorsements.
In 2018, boxer Floyd Mayweather and musician DJ Khaled were both fined for failing to disclose payments for promotion of crypto coins.
Kardashian’s representatives say she has been cooperative since the lawsuit started, and ‘remains willing to do whatever she can to assist the SEC in this matter’.
Despite including the word ‘#AD’ at the very bottom of the post in 2021, the SEC argued that investors were still misled about the nature of the endorsement.
The consequence of Kardashian’s Instagram ad, for which she was paid $250,000 by EMAX, isn’t as simple as a $1.2 million fine. In fact, the true impact of her promotion is hard to measure.
Kardashian’s fine comes after investors sued her in January of this year, claiming the businesswoman had collaborated to ‘misleadingly promote and sell’ EMAX in a ‘pump and dump’ scheme.
‘Pump and dump’ is a market term used to describe the tactic of dramatically inflating the price of an asset before ‘dumping’ and selling to investors. This inflation is often achieved through paid celebrity endorsements. And the bigger their social following, the better.
For Kardashian, who currently has 331 million Instagram followers, the EMAX endorsement may have felt like a drop in the ocean.
Her social media is peppered with gaudy paid ads for gimmicky products; everything from that infamous weight-loss lollipop to luxury handbag giveaways.
The budding lawyer also spoke openly about her payment for these brand deals. A fast fashion company famously offered Kardashian $1 million dollars to pose in their clothes, a deal she turned down at the time.
Sure makes the $250,000 she was paid by EMAX pale in comparison.
Representatives of Kardashian stated that her cooperation with the SEC was a means of avoiding ‘protracted dispute […] so that she can move forward with her many different business pursuits’.
Those business pursuits have earned Kardashian a net worth of $1.8 billion, making a $1.2 million fine from the SEC feel insignificant. It’s no wonder she was cooperative.
If these numbers seem hard to fathom, it’s because they are. Kardashian’s grotesque wealth makes her endorsement of EMAX feel icky.
As a successful billionaire and entrepreneur, Kardashian knows that fans and crypto traders alike will take her word for as gospel — especially when the paid nature of such a promotion is unclear.
And the sad reality is that the majority of those who bought EMAX off the back of Kardashian’s post are those that can least afford the crypto token’s dramatic financial crash.
With the economy in progressive states of chaos every day, low earners are seeking quick ways to boost their bank accounts.
Financial insecurity has pushed many to take greater risks, with the cost of living rising and the rate of pay — particularly in the UK — failing to catch up.
Gary Gensler, who chairs the SEC, called out Kardashian on Twitter this week, stating that her case should serve as a ‘reminder’ to think before investing.
‘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’, Gensler said.
‘When it comes to crypto, remember many of these are highly speculative assets’.
Kim Kardashian may be able to dust off a $1.2 million cheque at the SEC’s demand, but the victims of these baseless celebrity endorsements will be picking up the pieces for years to come.
Originally written by Flo Bellinger for Thred.