Kim Kardashian’s $1.3million fine for undisclosed crypto ad

Kim Kardashian has been ordered to settle charges of $1.3m after promoting a cryptocurrency without disclosing payment. 

The US Securities and Exchange Commission (SEC) found Kardashian guilty for failing to disclose that she was paid $250,000 to publish a Story on her Instagram account in June 2021. 

The Instagram Story promoted EMAX tokens, the crypto asset security from EthereumMax, and contained a link to instructions on purchasing the tokens on the EthereumMax website.

Despite conspicuously labelling the Story as an advertisement including the words ‘This is not financial advice,’ as well as passing the FTC’s checks, the SEC found her guilty. 

“Kardashian’s fine highlights the growing sophistication of creator compliance around the world,” commented Scott Guthrie, Board Member of the Influencer Marketing Trade Body. 

“Yes, marketing communications must be obviously identifiable as such but for creators and brands to stay compliant with relevant regulation compliance may mean more than slapping #AD prominently on a piece of content.” 

"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."

This is especially true as household budgets are tightening amid the cost of living crisis, and consumers are looking to earn some extra income.

Brands are also responsible 

“Creators have an implied responsibility to protect their consumers with sound advice if promoting personal finance products,” commented Thomas Walters, Founder and CEO of influencer agency Billion Dollar Boy. 

“Failing to do so could not only cost consumers and themselves financially – as is the case with Kim Kardashian – but could also affect their popularity online, a similarly important currency to creators and brands.

“It’s also the case, however, that this responsibility falls on the shoulders of brands and agencies who partner with influencers on content campaigns – including ensuring that financial content is ethical. To reduce risk, brands looking to partner with an influencer to issue financial advice should seek creators who are themselves accredited financial advisors.”

Guthrie added: “Regulation covers other areas including financial products – whether crypto, traditional, or new Buy Now Pay Later businesses. It covers protection against brands’ greenwashing claims, medicines and healthcare products, and the protection of children from the promotion of age-restricted products such as gambling or alcohol. There are rules, too, around commercial music use and IP ownership. 

“Brands risk reputation damage and fines when they fail to ensure that the influencers they work with fully follow relevant laws.”

Kardashian’s fine comes in the wake of Australian authorities issuing a warning that influencers could face jail time if they offer financial advice on TikTok on Instagram without a licence.

"Ms. Kardashian’s case 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," SEC Chair, Gary Gensler said.

Kardashian agreed to settle the charges, pay $1.26m in penalties, disgorgement, and interest, and cooperate with the Commission’s ongoing investigation.