Do you know what three strong words are enough to put the words “I love you” to shame?
“Not financial advice”!
And if you ever see your favorite influencer or social media celebrity promoting a token or asset for you to buy with the hashtag #NotFinancialAdvice, you better click away because you are staring a major red flag right in the eyes! 🚩
One thing’s for certain. The last few years witnessed significant growth in cryptos, digital assets, NFTs, and most importantly, scams!
When it comes to money, there are always bad players that want to dry up your accounts just so they could fill theirs. That’s what the internet veteran Kim Kardashian fell for a year back, a brunt she is bearing now!
So far the story is already out – Kim Kardashian is being sued for $1.26 million because she promoted a token namely Ethereum Max that she didn’t disclose she was being paid for. And even though the alarms were raised a year back, the repercussions are something she’s dealing with now.
But do you know who else promoted Ethereum Max? Matt Damon, Larry David, and Floyd Mayweather! And yet Kim was the only one that had to pay a fine. This seemingly double standard is nothing but an important distinction in securities law.
The story
With celebrity endorsements, millions of people around the world flew to crypto markets. Most of these investments were made because of emotional investing because it seemed everybody was benefitting from crypto investments more than ever. The term ‘crypto millionaires’ was thrown around like it was nothing.
Being an unregulated industry, there are a few bad players that emerge in crypto from time to time, one of which was Ethereum Max. Now while it shares a name with the second largest blockchain Ethereum, the EMax tokens had no particular association with Ethereum.
A common trait of the newly made tokens is that their celebrity endorsements are through the roof, something which Kim Kardashian made sure to participate in and talk about in one of her Instagram stories shared to 220 million followers (at the time).
Fast forward to now, she was slammed by the SEC with a million dollar plus fine for not disclosing that she was being paid $250,000 for this endorsement.
Looking at the value of the token now, well you can tell…
And it’s safe to say right now that this was nothing more than a pump and dump scheme which was participated in by celebrities like Floyd Mayweather and Matt Damon.
The SEC announced a fine for Kim Kardashian. The chairman of SEC Gary Gensler attacked celebrity endorsements, quoting “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.”
So why Kim?
It’s allowed for celebrities to endorse investment opportunities as long as they disclose why they are doing it. Kim Kardashian in this case seemed to cross the line by endorsing a crypto asset security.
Her story on Instagram touted an actual coin (Ethereum Max) which qualifies as a security. And since it’s a security, it automatically brings it under the SEC jurisdiction which is relatively more strict than FTC regulations that just govern the advertising part.
How it works is that if you are endorsing a company, you can hide your benefits by disclosing that it is just an ad or promotion you are doing for a company. In the case of security, however, disclosing that it is just an #AD isn’t enough. She was required to disclose how much she was being paid.
Paying a fine of $1.2 million isn’t a big deal for a fashion mogul like Kim Kardashian. She might find that kind of cash lying around between the cushions of her sofa. But what matters is that when it comes to celebrity endorsements, there’s a thin line that needs to be treaded on carefully.
It’s okay to tout a crypto company, not a coin.
As for us, regular investors, we need to be very careful about what to believe in before we decide to jump on the bandwagon of chasing profits. That’s all that matters. Do your own research, even if Kanye’s ex-wife is telling you that this token is great for you. Most times, it’s not!
Till next time…
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