Reality TV star Kim Kardashian has paid $1.26 million to settle with the U.S. Securities and Exchange Commission on charges that she illegally promoted EthereumMax digital tokens in 2021 to her 405 million social media followers — tokens that are now practically worthless.
The SEC charged the “Keeping Up With the Kardashians” star with failing to disclose a $250,000 payment she received for promoting content about EthereumMax, according to an SEC press release. Kardashian also agreed not to promote any cryptocurrencies for three years.
The SEC classifies the token as an unregistered security.
EthereumMax or EMAX has been controversial since launching in May 2021. Unaffiliated with the Ethereum cryptocurrency, EMAX is an altcoin that uses the Ethereum blockchain ledger to record sales and transactions. It was hyped as a cultural token that provides lifestyle perks with financial rewards and incentives to its holders with a mission of empowering users to disrupt the status quo.
It is difficult to tell from EthereumMax’s website exactly what it does. The site promised access to VIP experiences, sporting events and concerts and said holders would receive a 2 percent yield on every transaction, The Motley Fool reported in June 2021.
EthereumMax tokens hit an all-time high price of $0.000000597636 on May 31, 2021, and were trading with a lot more zeroes at $0.000000005287 as of this writing.
Other celebrities promoted EthereumMax in 2021, including professional boxer Floyd Mayweather Jr., who was also sued by the SEC.
“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,” SEC Chairman Gary Gensler tweeted.
Kardashian has built her reality TV stardom into a $1.8 billion net worth selling cosmetics, shapewear, fragrances and a mobile game. She has 331 million followers on Instagram and almost 74 million on Twitter.
The Kardashian and Mayweather celebrity cases are just the beginning of the potential fallout, Forbes reported. The SEC’s crypto assets and cyber unit is co-leading a team of at least eight people examining EthereumMax issues.
Kardashian published the promotion on Instagram in June 2021 and included a hashtag noting it was an ad.
“ARE YOU INTO CRYPTO??? THIS IS NOT FINANCIAL ADVICE BUT SHARING WHAT MY FRIENDS JUST TOLD ME ABOUT THE ETHEREUM MAX TOKEN,” the ad read in capital letters on Instagram. “A FEW MINUTES AGO ETHEREUM MAX BURNED 400 TRILLION TOKENS- LITERALLY 50% OF THEIR ADMIN WALLET GIVING BACK TO THE ENTIRE E-MAX COMMUNITY.”
The price of the crypto token rose 632 percent after Kardashian and other celebrities such as Mayweather promoted it Gizmodo reported. Regulators say Kardashian should have told consumers how much she was paid for the ad.
“The federal securities laws are clear that any celebrity or other individual who promotes a crypto asset security must disclose the nature, source, and amount of compensation they received in exchange for the promotion,” said Gurbir S. Grewal, director of the SEC’s Division of Enforcement. “Investors are entitled to know whether the publicity of a security is unbiased, and Ms. Kardashian failed to disclose this information,” Grewal added.