- Kim Kardashian violated a 1930s securities law in promoting crypto on her Instagram, the head of the SEC said.
- The SEC said Kardashian had violated Section 17(b) of the Securities Act of 1933.
Securities and Exchange Commissioner Chair Gary Gensler on Monday said Kim Kardashian was charged over an Instagram post touting a crypto security because she didn't disclose information that's required under a decades-old US securities law.
The SEC said Monday Kardashian will pay $1.26 million to settle charges stemming from a June 2021 Instagram post about EMAX tokens, a crypto asset security sold by EthereumMax.
In an October 3 administrative filing by the Securities and Exchange Commission, the regulator in imposing a cease-and-desist order said Kardashian had violated Section 17(b) of the Securities Act of 1933.
"Part of that law said that if you tout a stock, you need to disclose not only that you're getting paid but also the amount - so the source and the nature of those payments," Gensler said in a CNBC interview on Monday.
The TV reality star's post contained "#ad" - a hashtag used by influencers on social media to signify that a post is an advertisement. But the SEC said it found Kardashian failed to disclose that she was paid $250,000 to publish the post about EMAX tokens. Her post contained a link to the EthereumMax website that had instructions for potential investors to purchase the tokens, the regulator said.
Gensler said the ad hashtag may be appropriate under other laws to use on promotions for products such as perfume or vacation homes. "But these are the securities laws … and this was really to protect the investing public when somebody is touting a stock, and whether that's a celebrity, an influencer or the like, that's at the core of what this is about."
The SEC in announcing its action against Kardashian on Monday released a video featuring Gensler centered on its message that investment products promoted by celebrities and influencers do not mean they are appropriate vehicles for everyone.
The chairman in the CNBC interview noted the SEC had previously charged boxing champion Floyd Mayweather and record producer DJ Khaled over promoting a Centra Tech initial coin offering without either of them disclosing they were being paid. The 2018 charges were the SEC's first cases to charge touting violations involving ICOs. Mayweather and Khaled each agreed to pay more than $100,000 in fines to settle charges without admitting or denying the findings.
Kardashian, without admitting or denying the findings, also agreed not to promote any crypto asset securities for three years, the SEC said.
Crypto "is a highly speculative asset class. And so when a celebrity or influencer is touting it, it's important that the public understands that relationship and are they getting paid and how much they're getting paid on their Instagram site," Gensler said.
Kardashian cooperated with the SEC and is "pleased" to have resolved the matter so that she can focus on her business pursuits, her lawyer said in a statement provided to Insider.
"I want to acknowledge Miss Kardashian has been cooperating and [providing] ongoing cooperation and we really appreciate that," Gensler said during the interview.
EMAX tokens on Monday shot up 10% to $0.000000004935, according to CoinGecko.