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SEC slaps Kim Kardashian in a crypto scam

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Regulations exist for your protection, and one of the Kardashians has contravened them. The Securities and Exchange Commission has a new cryptocurrency case that would interest you.

It is easy to trust the words of your favorite celebrity, especially when they have one of the highest followings on Instagram. It checks out – they are not going anywhere, there is a reputation to protect, and you would think that they have decided to take accountability for the damage that may occur from their endorsement.

Here’s a quick rundown of the story.

Ethereum Max was launched in May 2021, and Kim Kardashian was paid $250,000 to promote it barely a month later. However, a year later, the value has reduced by more than 95 percent, which is a whopping amount!

Given the promoter of the cryptocurrency, many crypto investors would be hard-pressed not to invest, especially those with a strong social media presence. Ongoing investigations have also shown that one in five Americans saw the advert, and thirty percent of crypto investors also came across it.

There is no information on the number of people the “#ad” affected, but they are a considerable number. And given how far EthereumMAX fell after the promotion, Kim Kardashian did lead many people astray. Kardashian’s post also contained a link that took users directly to the EMAX website to buy the coins.

And it turns out she isn’t the only celebrity guilty of a charge of this nature. In the past, DJ Khaled, Floyd Mayweather, and Paul Pierce have also promoted projects they probably didn’t believe in.

That’s not the crime; the information withheld is. The reason is the gravity of loss that investors will encounter because of this missing piece. Gary Gensler, the chair of the SEC, is not here to play, especially with crypto projects rising and falling and failing and depriving citizens of their hard-earned money.

What are the SEC Rules for the Crypto Market?

Cryptocurrencies have been around for nearly a decade now. However, the SEC still has a few challenges regulating the market for several reasons. For one, despite the success of the decentralized finance market, it is unlike anything the world has seen before. Another reason is that digital assets are not strictly classified as securities.

Regulating the cryptocurrency market may be a contradiction of what decentralized finance is all about. Additionally, it cannot be said that digital tokens fall under the jurisdiction of the United States, even though 43 percent of all Ethereum nodes operate within American borders.

Therefore, it would take considerable time before the authorities can introduce proper regulation to that sector. While deliberations about regulating the cryptocurrency market are still ongoing, some rules exist to protect residents of the United States from financial market risks.

Some rules apply to it, especially Ethereum, because of the staking mechanism. And Kim Kardashian broke a major one.
Investing in the financial market is risky. But cryptocurrencies are even more volatile, which is why caution is advised.

A sector with minimal regulation is even more dangerous, so at the very least, investors must know what they are getting into. The chair of the SEC has stated that it is non-negotiable for influencers of cryptocurrencies to disclose the amount they receive to promote these digital assets.

If the government cannot control a decentralized sector, it can exercise some jurisdiction over how the majority of its citizens will be affected by it.

EthereumMax’s Maximum Failure

Could Kim Kardashian have been a part of an elaborate scam? It doesn’t seem like it, so why did she fail to disclose the amount she was paid per SEC rules?

Of course, you can argue that she included a disclaimer saying it was an #ad, but that just wasn’t enough. The SEC clarified that before you post about or influence a cryptocurrency, you must include how much you receive to promote it.

Why is that so important? You see, it helps investors genuinely determine whether the investment advice (well, Kim K did say it wasn’t a piece of advice, so let’s call it a nudge!) is worth taking or not.

Suppose your favorite celebrity has received a sum of money to promote or endorse something of a financial nature. In that case, they must also include whether it comes from a knowledgeable or experienced place or for financial gain.

Many cryptocurrency projects have risen and crashed almost immediately and in a striking manner. You hear the intentions of the network. There is enough noise in the whitepaper about what the protocol will achieve, and all that is required is funding.

If the use cases appear reasonable, a wise cryptocurrency investor may bite. In the case of a token like EthereumMax, it is easy to understand why Kim K’s followers may have been eager to invest in the said coin. After all, she wouldn’t validate something invalid or illegitimate.

EthereumMax is easily perceived as an offshoot of the popular Ethereum token, the first altcoin and the first successor of Bitcoin. You would think that EthereumMax would be capable of maintaining a significant value compared to the token everyone in the DeFi space knows and is familiar with.

Although Kim Kardashian isn’t in the best position to give investment advice of that nature, considering that she wouldn’t qualify as a tech sis, if her fans and followers give in and adopt her recommendations, it is understandable.

The facts around the case are straightforward. EthereumMax may have easily been believed to be the token that perhaps replaces Ethereum or even shares the spotlight. It seemed to be a sub-token or sub-project from the Ethereum blockchain. And it is built there, making it an ERC-20 token.

However, it turned out to be exactly nothing like expected. In May 2021, when the token was released, it seemed promising. It soared to an all-time high of $5.80 but is now trading at a ridiculous price.

June 2022, and the coin is trading below a dollar.
So, what about actors like Elon Musk? He always promotes Doge Coin; he has a personal interest in the digital token and may not be paid to tweet about or promote it, but it is general knowledge that engagement and the value of the native coin spiral each time he mentions something about it.

Why isn’t he under scrutiny from the SEC or even crypto enthusiasts?

Well, there is a difference between both situations. The SEC has made it clear that before you promote any token, you must include the amount you have been paid for said promotion. There is no mention of Musk being paid to promote or influence the coin.

So, it is safe to say that he tweets about it of his volition. When Bitcoin was Musk’s favorite, he made it known to the world. Of course, he had an invested interest in the project, so any increase in value would have benefited Musk and other major Bitcoin owners.

But in the same vein, Musk disclosed that he wouldn’t be investing in Bitcoin any longer because of the destructive effects of mining on the environment. Despite his strong belief and previous promotion of the cryptocurrency, Musk wasn’t afraid to speak up when it stopped aligning with his environmental values.

On behalf of Tesla, he invested $1.5 billion in the Bitcoin market. Being the man that he is, Musk’s investment caused a soar in the value of the cryptocurrency. You will agree that it was around this period that the token attained its all-time high of 6$60k plus, very close to $70k.

Does this sound similar to the charges Kim Kardashian faces?
No, they are nothing alike because there is evidence that Tesla and Musk indeed purchased thousands of Bitcoin. You can check the blockchain for all 10,500 bitcoins purchased by Tesla. There was a clear intention to invest in the project because the idea of decentralized trading appealed to Musk.

To put it as plainly as possible, it is evident that Musk is invested in the cryptocurrency world because he tweets about, reads, and educates himself about it and shows more than a mere monetary interest in it. Furthermore, he is a genius, so, understandably, many look to him for advice.

On the other hand, Kim Kardashian propagated the idea of investing in EthereumMax because she was paid to do so. It is doubtful that she did her research well, as expected, before you invest in any cryptocurrency. Kim K probably didn’t know what was in the whitepaper or the project’s proposed Road Map.
These are things that the average investor or even a budding crypto enthusiast should know.

Musk wasn’t paid to promote any cryptocurrency, even though he stands to gain a lot of money if the value of the coin he tweets or talks about increases. If you enjoy Musk’s presence on Twitter, you will know he is there for fun and a bit of seriousness. So, his tweets about Doge Coin are never promotional, just his opinion.

In contrast, Kim K’s was promotional, and she wasn’t vocal enough about it, at least not to the SEC. The rules guiding the promotion of cryptocurrencies are clear so that the interest of the minority will be protected.

The SEC believes that if the public knows the details of the promotional tweet relating to financial or supposed financial advice, they will make better investing decisions.

The idea is valid. Let the world know if you were paid a lot of money to promote a subject you know almost nothing about. If she had previously participated in cryptocurrency interactions or events, it would be safe to assume that she had some authority over the subject.

This is also a small figurative slap on the wrist for crypto investors who took investing advice from the SKIMS owner and reality TV star. From a logical point of view, you shouldn’t take advice from someone who isn’t experienced in a subject. Even though you expect fact-checking, the chances of that happening are slim.

So, you protect yourself by relying on your financial advice and opinions alone. If you want to thrive in the finance industry, expand your knowledge and invest only in projects that benefit you or that you believe in.

What are the Charges Kim K Faces with the SEC?

The Securities and Exchange Commission for the United States spares no one, not even a favorite of the people. The rules are clear – disclose to the public if you are paid for promotions.
Although the post on Kim’s Instagram includes some disclaimer, the SEC postulates that it was insufficient given the gravity of damages faced as a result. Therefore, Kim Kardashian was charged a disgorgement fee of $260,000. This was to disburse her pay for the ad she posted.

Then, she had to pay a fine of $1,000,000 as a penalty for contravention of the law. She will also be banned from posting anything about the decentralized finance market for the next three years. Chances are this isn’t much of a punishment, considering that Kim Kardashian wasn’t previously invested in the crypto world.

Kim Kardashian has agreed to the charges and says she will cooperate with the SEC regarding ongoing investigations.

A Glimpse at the Past

The crypto craze of 2021 resulted in serious financial losses for numerous cryptocurrency investors. Many celebrities promoted cryptocurrencies they likely didn’t invest in or believe in.
But their loyal fans took their words literally and went for it. This cost them money when these projects came crashing down. Perhaps the crypto craze happened because there are almost no rules governing Initial Public Offerings.

This is a disadvantage of decentralized finance. It is unregulated; although the United States is striving to protect its citizens regardless. That’s why it’s possible for Kim Kardashian to face the music for perpetrating financial loss for many US crypto traders and investors.

Perhaps it will serve as a warning to celebrities who choose to endorse projects they don’t believe in. The discreditation is worth more than the sum paid.

It is easy to understand why people are agitated. The word of a Kardashian, a lawyer, billionaire, and fashion line owner should be trustworthy and carry enough weight. The SEC certainly thinks so, which is why it mandates every celebrity or influencer of a cryptocurrency to disclose the amount they are paid for each ad they display.

Kim may not have meant any harm by posting the ad on her Instagram. But she wasn’t the only one who did it and therefore isn’t the only one facing SEC charges. A lawsuit has already been slapped on her wrist by disgruntled plaintiffs who believe her advice cost them dearly.

The value of the token she promoted, EthereumMax, has dropped massively since she posted about it. A loss of 95 percent is difficult to recover from, especially if a large sum of money was invested, so caution is always advised when trading the financial market.

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