Kim Kardashian Ad Disclosure Penalty News
The global influencer, model and reality superstar, Kim Kardashian has agreed to settle a $1.26 million ad non-disclosure dispute with U.S. Securities and Exchange Commission) SEC). The Securities and Exchange Commission, on Monday of Oct 3, 2022, placed a charge on the reality show TV celebrity upon finding out that she had “violated the anti-touting provision of the federal securities laws.”. It’s huge story, as Kim Kardashian has a major influence on young women, including teenagers across the world.
The charges come after a nine-month-long investigation launched in January this year. Investors sued Kim alongside celebrity boxer Floyd Mayweather Jr. and basketball player Paul Pierce for allegedly misleadingly promoting a cryptocurrency called EthereumMax. What investigators have since called a “pump and dump” scheme aimed to ‘inflate’ EthereumMax crypto currency price before selling to investors. The commission found that Kim failed to disclose her $250,000 payout. The payments were for a promotional video on her Instagram page for EMAX token – the crypto security sold by EthereumMax.
What is the SEC? Who are the SEC?
The Securities and Exchange Commission (SEC) is a U.S. government agency that is responsible for regulating the securities markets and protecting investors.
Kim Kardashian settles the charge for Unlawfully Touting Crypto Security
Kim decided to settle the dispute with the SEC without denying or agreeing with the investigations. She paid $1.26 million in penalty payments. The price includes $260,000, which represents the original pay by EthereumMax, plus interest. Additionally, it consists of a 1 million penalty for violating the anti-touting provision in the federal law on crypto asset securities. In a statement, lawyer Michael Rhodes said,
“Ms. Kardashian is pleased to have resolved this matter with the SEC. Kardashian fully cooperated with the SEC from the beginning and 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. The agreement she reached with the SEC allows her to do that so that she can move forward with her many different business pursuits.”
“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,”
SEC’s chair said on Twitter. In a press release, the agency has also encouraged investors to always:
“consider an investment’s potential risks and opportunities in light of their financial goals.” Before making any advances in crypto currency investments.
What is the law on advertising securities in the U.S.?
The Securities and Exchange Commission is arguably making its cases known about influencer security disclosure issues. But what is the law on advertising securities in the U.S.? The U.S. law under the federal securities laws litigates that persons of influence who touts a stock, or crypto security have a legal obligation to unveil that they are getting paid to do so. Additionally, the law requires such persons, whether a celebrity or influencers, to reveal the amount they are getting paid, including such details as the source and nature of the payments SEC chair Gary Gensler has disclosed.
Investigations revealed in her January post, Kim Kardashian included a link to a landing page on EthereumMax that gave prospective investors instructions on how to purchase EMAX tokens and that violated the anti-touting regulations. According to Gurbir S. Grewal, SEC’s director in the enforcement division, investors are entitled under the law to know whether security publicity is unbiased. Kim failed this test and had to face the necessary charges.
While the post had the common #add, regulators say that is not enough. Adding the #ad isn’t adequate for advertising securities in the U.S. Therefore, influencers and celebs must then mention how much developers or marketers pay them. The #ad is okay in most cases, but not regarding the promotion of security. Nevertheless, the regulator welcomed her cooperation and willingness to further work with the agency in the ongoing investigations. We really appreciate that,” Gensler said on Monday.
Kim Kardashian and the EthereumMax stalemate
In a few years, crypto currencies have grown from novel tech creations to thousands of dollar tech creations capable of disrupting the world’s financial systems. For example, developers create 24 new crypto currencies every passing week. So, literally everyone can make crypto currency. You need ‘small’ starting capital, a promotional channel, and a good name to match.
To crypto currency proponents, it is an excellent democratization of power. It decentralises the creation and control of money away from central banks. On the contrary, the protagonists argue that crypto currency is hugely unregulated. Therefore, it could end up in the wrong hands or be misused. Nothing is more evident like the latter, where investors have been caught unsuspectingly in fraudulent crypto schemes.
A common example is this new Kim Kardashian and EthereumMax case. Investors and influencers fell prey to unsuspecting, not well-conceived crypto schemes. While we can not guarantee this is the case, Joe Tidy on BBC news argues that with everybody having the ability to create new digital currencies, the newly created coins have no or little value to the product.
Subsequently, marketing is vital in propping up their value. Influencers are the most valuable asset to achieve this goal. EthereumMax pumped vast sums of money in snapping celebrities like Kim into propping up their new crypto venture. Still, like most new crypto currencies, everything seemed held together and working according to plan but fell apart later. The lawsuit filed in a Los Angeles court claims Kim Kardashian and two others touted EthereumMax tokens to boost in price value and profiteered at the expense of investors and followers. EthereumMax’s deal fell by a record 98% since Jun 13, 2021, when Kim Kardashian went live on her Instagram page.
Our take on Ad Disclosure regulations and the charge placed on Kim Kardashian
Regulators in the USA and the UK have made regulating crypto currency markets a top priority, and Kim Kardashian’s case might be just a drop in the sea. In the past few years, SEC alone locked horns with the entertainment industry. The agency has had issues with boxer Floyd Mayweather Jr., music producer DJ Khaled, and actor Steven Seagal over ad non-disclosure and working with companies that deceived investors of tens of millions of dollars. Regulators in the U.S. and U.K. are on the watch. They require businesses, companies, and creators to be on the lookout so that they don’t find themselves on the wrong side of the law. Getting into a legal dispute with the government can be resource draining and even reputation soiling.
Work with a top influencer management agency
Prof. Alexandra Roberts, from Northeastern University, has told Digday.com, the penalty may not impact a billionaire influencer like Kim. But still, it is sending out a message to influencers and celebrities to follow the law. He argues further that celebrities like Kim Kardashian ought to know their game. But for micro influencers, the burden of ad disclosure lies on the company hiring them. It is solely upon the company to educate its influencers and ensure influencers are ad disclosure compliant.
At the House of Marketers, we understand the rules and regulations for the majority of industries because of our wide range of clients. We give you access to the voices that matter for your campaigns. We work with diverse creators who help innovate new trends and engage our customers’ clients. Work with us and enjoy a reliable TikTok influencer management strategy by contacting us here.
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