Key points to remember
- Kim Kardashian will be fined $1.26 million for not revealing to her Instagram followers that she was financially compensated for promoting EthereumMax.
- This could be a sign that the SEC will introduce new regulations on the cryptocurrency space.
- The SEC has released a video urging the public to think twice before taking investment advice from celebrities and influencers.
In rather surprising news, Kim Kardashian has been fined by the SEC for her alleged involvement in a cryptocurrency ‘pump and dump’ scheme because she did not disclose that she had been financially compensated for the announcement. The news was unexpected as many celebrities and athletes have been keen to promote new pieces in the market over the past few years.
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Celebrity crypto endorsements have come from Matt Damon, Tom Brady, and Gwenyth Paltrow, to name a few. They have promoted everything from cryptocurrency exchanges to NFT projects and even the appearance of risky new coins. Elon Musk regularly promoted Dogecoin across social media as he became closely associated with the meme coin, though many skeptics were quick to point out that the crypto started out as a travesty.
The SEC released a video this morning, October 3, along with a press release informing the public that Kim Kardashian had been fined for failing to disclose that she was receiving financial compensation for promoting EthereumMax. They pointed out that we should all think twice before buying celebrity investment opportunities.
What happened with Kim Kardashian and The Crypto Scheme?
In June 2021, Kim Kardashian took to Instagram to promote a new cryptocurrency coin to some 250 million followers. The coin was EthereumMax, and the post used the hashtag “#ad,” but Kardashian implied that her friends told her about the coin instead of mentioning her alleged ties to the company in the form of a payment of $250,000 for publication. There’s a big difference between promoting something you believe in and getting paid to promote an investment opportunity.
The agency announced on the morning of October 3 via a tweet from SEC Chairman Gary Gensler and a press release that Kim Kardashian had agreed to the fine. Kardashian has not commented on the regulator’s findings.
The official SEC press release wrote the following about Kim Kardashian and EthereumMax:
“Kardashian has agreed to settle the charges, pay $1.26 million in penalties, restitution and interest, and cooperate with the Commission’s ongoing investigation.
The $1.26 million figure includes a $1 million penalty as well as $260,000, covering the $250,000 she received for promotion and interest. It will also cooperate with the ongoing investigation while agreeing not to promote any crypto assets for three years. This story has generated a lot of media interest as it could lead to further problems for other celebrities who have promoted crypto in the past or wish to promote it in the future. There could potentially be more lawsuits and legal issues to come as the cryptocurrency space loses billions of dollars.
Why was this crypto promotion such a problem?
It is debatable whether the issue was the actual merit of the cryptocurrency. Earlier in the year, there was an announcement of a class action lawsuit against EthereumMax, where both Kim Kardashian and Floyd Mayweather were listed for an alleged “pump and dump” scheme. The lawsuit alleges that EthereumMax used celebrity endorsements to boost the value of this coin in order to inflate the price before selling its shares for a profit.
However, the lawsuit and the investigation are still unresolved, while this fine resulted from the promotion of the play. Failure to disclose payment for touting a stock is a direct violation of federal securities law. The SEC believes that the public deserves to know whether an investment promotion is unbiased or not. When a celebrity is paid to promote any type of investment, it is considered biased.
The main problem is that crypto is an unregulated space, many new projects have popped up in recent years that are either complete scams or just serve no purpose. Since the space is unregulated, almost anyone can set up some sort of crypto project without having to go through the proper registration process for traditional securities. It’s hard for the public to tell if a celebrity actually believes in a project or if they’ve just agreed to be paid for profit.
What does this mean for crypto?
This fine and the media attention it has garnered will get many people talking about cryptocurrency. The SEC has taken a tough stance on celebrities and influencers promoting cryptocurrency projects to their audiences without disclosing their financial ties.
It could also be a sign of further regulation in the cryptocurrency space. We recently wrote about the Ethereum merger, which led the SEC to say that the move to a proof-of-stake (PoS) mechanism could mean a blockchain would be considered a security. If this happens, the entire Ethereum blockchain will need to be registered with the SEC. If Ethereum is labeled as a security, then all other cryptocurrencies that use the PoS system (like Cardano and Solana) should also be registered with the SEC. These would be undesirable regulations for the decentralized crypto world.
We will continue to update you on what is happening with cryptocurrency regulations. As previously reported, the investigation into this situation with EthereumMax is not yet complete.
What do you need to know about investing in crypto?
We’ve all seen how volatile the stock market can be in 2022, with the market reacting to any news of rising interest rates or global strife. The cryptocurrency market is even more volatile than the stock market since it is open 24/7. The Luna crash earlier this year wiped out around $60 billion from the crypto market.
We must reiterate that investing in even the most popular cryptocurrency coins is risky. For example, as of October 3, Ethereum is down 64.08%, while Bitcoin is already down 57.54% for 2022. As you can imagine, you would have lost a significant amount if you had invested in these parts towards the beginning of the year. For what it’s worth, if you chart the timeline of these celebrity crypto endorsements, you’ll see that they have a disastrous track record.
Since the cryptocurrency space is unregulated, it can be difficult to determine the legitimacy of a project. We urge you to find as much information as possible before investing in a coin that is relatively new or does not contain a lot of data.
Many of us still want to invest in cryptocurrency as the world embraces digital currencies. One way to invest in crypto without choosing individual coins based on too little data is to invest in our Crypto Kit which helps spread the risk across the industry. Our AI works 24/7 to select investments and allocate portfolio weightings.
Download Q.ai today to access AI-powered investment strategies. When you deposit $100, we add an additional $100 to your account.
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Kim Kardashian Fined For Promoting Cryptocurrency, Here’s What It Means For Crypto
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