Kim Kardashian has 331 million Instagram followers. Every post she shares results in millions of views, likes, and comments. But, why did one of her posts result in a $1.26 million dollar fine?
The Million Dollar Instagram Post
In June 2021, Kim Kardashian shared a post on her Instagram account. It said, “ARE YOU INTO CRYPTO??? THIS IS NOT FINANCIAL ADVICE BUT SHARING WHAT MY FRIENDS JUST TOLD ME ABOUT THE ETHEREUM MAX TOKEN.”
The post included a link to the EthereumMax website which gave users instructions about how to buy crypto tokens. The post also included a hashtag that said “#ad.” It was a paid promotion.
Kardashian was paid $250,000 by EthereumMax, through an intermediary, to publish the post.
Guidelines for how influencers and celebrities can get paid to endorse products and businesses through their social media accounts are set by the Federal Trade Commission (FTC). The rules say accounts getting paid to promote a product or business through their social media account must disclose that they are being paid.
Kardashian appeared to have followed the disclosure rules set by the FTC. She noted that it was a paid promotion. So, what led to her $1.26 million fine?
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Facing SEC Charges
While Kardashian followed FTC guidelines, she failed to follow guidelines from the U.S. Securities and Exchange Commission (SEC).
On October 3, 2022, the SEC issued a press release and announced it was charging Kardashian “for unlawfully touting crypto security.”
The press release said, “The SEC’s order finds that Kardashian failed to disclose that she was paid $250,000 to publish a post on her Instagram account about EMAX tokens, the crypto asset security being offered by EthereumMax.”
It went on to say, “The SEC’s order finds that Kardashian violated the anti-touting provision of the federal securities laws.”
Kardashian followed FTC rules for sponsored posts, but she failed to follow SEC rules for sponsored posts related to financial investing.
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Settling the Case
The SEC press release announcing charges against Kardashian also announced the settling of the case.
Kardashian agreed to pay $1.26 million to settle the SEC charges. The total settlement represents a $1 million fine and the amount Kardashian was paid for the ad ($250,000) plus interest.
According to the SEC press release, “Kardashian fully cooperated with the SEC from the very beginning and she remains willing to do whatever she can to assist the SEC in this matter. She wanted to get this matter behind her to avoid a protracted dispute. The agreement she reached with the SEC allows her to do that so that she can move forward with her many different business pursuits.”
By settling the case, Kardashian likely avoided an intrusive investigation. Fighting the charges could have forced Kardashian to appear for a deposition and provide more thorough documentation. She avoided further investigation by quickly settling the case and agreeing to additional SEC terms.
As part of the settlement, Kardashian agreed to pay $1.26 million, to not promote crypto assets for three years, and to help with the ongoing investigation.
Kardashian agreed to the fine and terms of the settlement, but she did not admit or deny the charges against her.
The SEC appears to be setting a standard with the Kardashian case. The commission has warned other celebrities about similar promotions and has also wanted consumers about the risks of following influencer investment advice.
“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,” said SEC Chair Gary Gensler. “We encourage investors to consider an investment’s potential risks and opportunities in light of their own financial goals.”
While $1.26 million might seem like a steep fine, Kardashian is estimated to be worth $1.8 billion.
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TJ Grimaldi joined McIntyre in 2011. McIntyre recruited TJ to create the divisions of personal injury and family law, as well as to expand the existing criminal defense practice at the firm. During TJ’s tenure at McIntyre, he has helped oversee and grow these practice areas. He continues to practice in these divisions while also expanding his own practice areas to include estate planning and immigration law. TJ is admitted to practice before the Supreme Court of Florida and the United States District Court for the Middle and Southern Districts of Florida.
