American socialite Kim Kardashian will pay $1.26 million in penalties for her involvement in the promotion of a cryptocurrency scheme called EthereumMax (EMAX).
The United States Securities and Exchange Commission (SEC) announced the charges against Kardashian on Oct. 3 for "touting on social media a crypto asset security offered and sold by EthereumMax" without disclosing the payment received for her promotional involvement.
Kardashian has agreed to settle the charges and pay $1.26 million in penalties, disgorgement and interest and is set to cooperate with further investigations by the SEC into the EthereumMax project.
The announcement noted that Kardashian failed to disclose a $250,000 payment she had received to publish a post on her Instagram profile promoting EMAX tokens with a link to the project’s website.
The order by the SEC finds that Kardashian violated the anti-touting provision of federal securities laws. This has been the case with other prominent cryptocurrency securities violations involving the SEC in the past.
Kardashian neither admitted or denied the SEC’s findings but agreed to settle the charges. This was broken down into $260,000 in disgorgement as well as a $1 million penalty. Kardashian has also agreed to not promote any cryptocurrency assets until 2025.
SEC chairman Gary Gensler also used the order to advise the general public to do their due diligence when investing in cryptocurrency assets, while reminding celebrities and influencers of their obligation to disclose payments relating to promotions of 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."
Kardashian’s legal team also filed a motion to set aside a class-action complaint aimed at the businesswoman and other American celebrities in August 2022. Kardashian and a handful of other prominent American social media influencers were served with a class-action complaint in January 2022 over claims they misled investors through the social media promotion EthereumMax.
Kardashian posted Instagram stories promoting the project in June 2021, with the likes of boxing great Floyd Mayweather also embroiled in the lawsuit after promoting the Ethereum-based token in the build-up to a celebrity boxing bout against YouTuber Logan Paul during the same period.
Fans could purchase pay-per-view tickets with the token, which surged after the promotion by Kardashian and other influencers. The value of EthereumMax dropped significantly afterward, leaving many out of pocket.
The original court filing that listed Kardashian, Mayweather and eight others claimed that company executives had collaborated with celebrity promoters to make misleading statements about the token and their control of the majority of tokens. Steve Gentile and Giovanni Perone were listed as co-founders of the project.