Kim Kardashian has agreed to pay $1.26 million to the U.S. Securities and Exchange Commission for promoting cryptocurrency on her Instagram without disclosing she was paid to do so.
The SEC concluded the Keeping Up with the Kardashians star promoted EMAX tokens on her Instagram account, which had 331 million followers as of today, without publicly acknowledging that token-maker EthereumMax paid her $250,000 for the single post. The June 13, 2021, post linked to EthereumMax’s website, where people could purchase their own tokens.
Kardashian did not admit wrongdoing, but she didn’t deny it either, and she agreed not to promote cryptocurrency for the next three years.
SEC Chair Gary Gensler said the 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.”
“Ms. Kardashian’s case also serves as a reminder to celebrities and others that the law requires them to disclose to the public when and how much they are paid to promote investing in securities,” Gensler said in a press release.
Kardashian’s lawyer said she’s “pleased to have resolved this matter with the SEC.”
“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,” according to an emailed statement from Michael Rhodes of Cooley LLP. “The agreement she reached with the SEC allows her to do that so that she can move forward with her many different business pursuits.”
The settlement essentially resolves the civil case before it even formally began, with the SEC announcing the charges and settlement on Monday in the same press release. But the case could come up again should she seek to become a licensed lawyer in California as she’s said she’s trying to do.
Scott Tenley, a partner Michelman & Robinson, LLP, in Irvine, California, said the settlement “is a matter that must be disclosed to the State Bar if Kardashian wants to practice law in the future.”
“Whether it will prevent her from obtaining her license remains to be seen,” said Tenley, a former assistant U.S. attorney in the Central District of California, noting that Kardashian wasn’t required to admit misconduct.
Kardashian announced in December 2021 that she’d passed a California State Bar examination known as the baby bar, which is the first test required before aspiring lawyers not following a traditional law school path. Kardashian said she’d previously failed the test three times in two years “but I got back up each time and studied harder and tried again until I did it!!!”
She still needs to pass the full California State Bar examination, which vexes even students from top law schools with such a low passage rate that there’s an ongoing effort to lower the minimum passing score. Should Kardashian pass the test, the SEC settlement could be an issue, but Tenley said the charges “pertain to her failure to disclose her status as a paid endorser of cryptocurrency, not the type of fraud, deceit, and dishonesty that would typically put one’s bar status in question.”
“And of course, any assessment of her moral character will also weigh her involvement in criminal justice reform and clemency initiatives, which reflects positively on her character and fitness to practice law,” Tenley said. Spotify on Monday released the trailer and first two episodes of a podcast Kardashian is hosting called Kim Kardashian’s The System: The Case of Kevin Keith, which focused on a man accused of a triple homicide in Ohio in 1994.
Of the $1.26 million Kardashian has to pay, $260,000 is disgorgement to account for Kardashian’s $250,000 payment from EthereumMax as well as interest. The other $1 million is a penalty. She’s to pay it all within 20 days, according to the seven-page order released Monday.
The order says Kardashian’s post occurred nearly four years after the SEC warned that any “celebrity or other individual who promotes a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion. A failure to disclose this information is a violation of the anti-touting provisions of the federal securities laws.”
“Kardashian violated Section 17(b) of the Securities Act by touting the EMAX token sale on her social media account without disclosing that she received compensation from the issuer for doing so, and the amount of the consideration,” according to the order.
Gurbir S. Grewal, director of the SEC’s Division of Enforcement and former New Jersey Attorney General, said securities law clearly states “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.”
“Investors are entitled to know whether the publicity of a security is unbiased, and Ms. Kardashian failed to disclose this information,” Grewal said in the press release.
Read the full SEC order below: