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Kim Kardashian’s $1.26 million SEC fine is pocket change for the star

The influencer was charged with failing to disclose that she was paid to promote a crypto offered by EthereumMax. But the penalty will barely sting.

Kim Kardashian in Italy last month. (Miguel Medina/AFP/Getty Images/AFP/Getty Images)

Celebrities who endorse cryptocurrency received a much-needed warning from the Securities and Exchange Commission through a $1.26 million settlement with Kim Kardashian. But it’s not likely to scare some of these highly paid promoters from hawking this highly speculative investment.

The SEC charged Kardashian with failing to disclose that she was paid $250,000 to promote EMAX, an obscure crypto offered by EthereumMax.

Tout crypto if you want, but you had better be upfront about your bias, the agency is telling social media influencers.

Kim Kardashian to pay $1.26 million in SEC crypto case

“Digital tokens or coins offered and sold may be securities, and those who offer and sell securities in the United States must comply with the federal securities laws,” the SEC said in its order referring to a 2017 warning.

The settlement was a slight win for the SEC’s effort to highlight to investors the speculative nature of cryptocurrency.

“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 Chair Gary Gensler said.

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The SEC got what it wanted: A high-profile punishment. But it wasn’t harsh enough. It’s akin to a regulatory slap on the wrist for Kardashian, a multimillionaire self-promoter.

Without admitting or denying the SEC’s findings, Kardashian agreed to settle with the agency. A lawyer for the social media mogul said Kardashian settled to “avoid a protracted dispute.”

“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 statement said.

And there you have it.

It was as if Kardashian was using her well-manicured hands to gently wave away a gnat.

Kardashian’s $1.26 million settlement, which represents her quarter-of-a-million-dollar promotional payment, interest and a $1 million penalty, isn’t going to sting financially.

In a 2011 “Keeping Up With the Kardashians” episode shot in Bora Bora, Kim temporarily lost an uninsured $75,000 stud earring in the ocean. (Her sister Kylie Jenner dived in and found the earring.)

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Who wears such an expensive set of earrings for a family beach vacation?

Obscenely rich people who can make an SEC securities violation quickly go away, that’s who.

Based on her own braggadocio Instagram postings, Kardashian can drop $1 million on a couple of Birkin bags, one-day shopping sprees, and a few Mediterranean superyacht vacations.

The SEC punishment isn’t even pocket change for Kardashian. It’s like coins you find under your couch cushion. It’s money you don’t miss.

Kardashian also agreed not to hawk any crypto asset securities for three years.

Big whoop.

Ironically, in the 24 hours after the SEC settlement with Kardashian, the price of EthereumMax shot up by about 87 percent, according to CoinMarketCap.

This settlement should have done more to tarnish her credibility because so much about her June 13, 2021, crypto Instagram post was disingenuous.

Let’s take a deep dive into the now infamous Instagram post.

Kardashian starts by asking: “Are you guys into crypto????”

She knows her audience. Of course, many of them are interested in what so many think is the next big investment breakthrough that could make them filthy rich. If Kim Kardashian is dabbling in crypto, they want to try it too.

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Then she wrote, recognizing that she might be on legal soft ground, “This is not financial advice.”

This is what any well-trained promoter will claim to avoid trouble from securities regulators. But that language is a false note.

She steered people to a link to EthereumMax 's website, which provided instructions on how potential investors could purchase EMAX tokens, the SEC said. By the way, EMAX is different from ethereum, which is one of the most popular cryptocurrencies.

Swipe up to “join the E-Max community,” Kardashian urged her legion of FOMO followers.

Nothing in the post warned potential investors that they were being directed to a volatile, speculative asset. She didn’t explain the risks involved with crypto investing.

“Purchasers of EMAX tokens would have had a reasonable expectation of profits from their investment in the tokens,” the SEC said in the settlement order. “EthereumMax’s marketing materials, moreover, contained numerous direct statements that the EMAX tokens would rise in value as a result of the efforts of the Company and its agents.”

Kardashian’s post further said she was sharing “what my friends just told me about the ethereum Max Token!”

What friends?

The folks she hangs out with from EthereumMax who gave her $250,000 to help promote their company?

Kardashian ended the Instagram post with #AD, indicating it was an advertisement. I guess it was supposed to communicate, “Hey, y’all, I’m getting paid to help you become wealthy too.”

That #AD hashtag was a trifling attempt at disclosure.

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“Investors are entitled to know whether the publicity of a security is unbiased,” said Gurbir S. Grewal, director of the SEC’s Division of Enforcement.

Celebrities have long shilled for products to cash in on their popularity. Sure, fine, whatever.

But with great social media power and presence comes great responsibility to be upfront about risky investments that could leave your fans broke.

My advice: Don’t take advice from celebrities backing crypto.

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If you have a personal finance question for Washington Post columnist Michelle Singletary, please call 1-855-ASK-POST (1-855-275-7678).

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