Kim Kardashian was sanctioned for sponsoring cryptocurrencies

«This is not financial advice, but sharing what my friends just told me about the EthereumMax token!»: those are the words that opened the 2021 Instagram stories that cost Kim Kardashian more than $1.3 million. On Monday, the Securities and Exchange Commission (SEC) announced that it had civilly charged the US entrepreneur for promoting a crypto asset on Instagram without disclosing that she had been paid to do so. And so it was that Kim, in order to end her dispute with the government, found herself having to pay a six-figure fine and promise not to promote cryptocurrencies for three years. But Kardashian is not the first celebrity to end up in trouble with the SEC: Floyd Mayweather Jr., Steven Seagal and DJ Khaled have also been sanctioned following crypto sponsorship, while many others have exposed themselves without receiving any money for doing so, as in the case of Elon Musk's tweets supporting Dogecoin, Matt Damon's support for the Crypto.com platform, or Larry David's Super Bowl ad for the cryptocurrency exchange FTX. But why is advertising or even associating one's image with cryptos so problematic for celebrities? For the same reason that you have never seen a public figure sponsor stocks on social media.

Regulators have a long history of taking action against celebrities and influencers who have advertised products without declaring that they received a fee for doing so. The SEC prosecuted Kardashian not only for failing to disclose that she had received payment for the promotion, which amounted to over $250,000, but also made it clear that it considers EthereumMax to be a stock that as such is subject to a long and strict set of rules to protect investors. In order to avoid committing violations of the anti-touting provisions of the federal securities laws, Gurbir S. Grewal, Director of the SEC's Enforcement Division stated that persons promoting «a virtual token or coin that is a security must disclose the nature, purpose, and amount of the compensation received in exchange for the promotion - in other words, #ad, alone, is not enough - Investors have a right to know whether a security's publicity is unbiased and Ms. Kardashian has not disclosed this information».

Particularly because tokens have proven to be an endless pit of scams in recent years, highlighting, already during the pandemic, the short-term need for clear regulations on the subject. Celebrities are using their influence to promote cryptocurrencies, a notoriously complex and volatile industry that can lead people to invest in coins or projects they may not understand. «Ms. Kardashian's case also serves as a reminder to celebrities and others that they are required by law to disclose to the public when and how much they are paid to promote their investment in securities» Gary Gensler added in the statement announcing the settlement disclosed by CNN, but at the same time the matter could take a broader turn and become a class action lawsuit - class action - filed in January by Ryan Huegrich on behalf of all investors who purchased EMAX tokens between 14 May and 17 June 2021. An accusation alleging that EthereumMax executives and promoters made false or misleading statements through social media and other promotions including through well-known personalities such as Kardashian herself, boxer Floyd Mayweather Jr. and former NBA player Paul Pierce. In light of the facts, celebrities and other cryptocurrency promoters should think twice before giving what appears to be financial advice to their followers.