Kim Kardashian agreed Monday to pay the SEC $1.26 million to settle charges of promoting cryptocurrency to her Instagram followers without disclosing that she was paid for the promotion.
Kardashian, 41, who passed the California “baby bar” exam in December 2021, was paid $250,000 for touting EthereumMax crypto tokens in June 2021 to her then 225 million Instagram followers, the SEC said.
Her post said, “THIS IS NOT FINANCIAL ADVICE BUT SHARING WHAT MY FRIENDS JUST TOLD ME ABOUT THE ETHEREUM MAX TOKEN!” The post included a link to a website where investors could buy the crypto tokens.
She also created an introductory video stating she had a “big announcement,” the SEC said.
Without admitting or denying the SEC’s findings, Kardashian agreed to pay disgorgement of $250,000, prejudgment interest of about $10,400, and a civil penalty of $1 million.
SEC rules make it unlawful to tout crypto that’s a security in return for “consideration received or to be received, directly or indirectly, from an issuer, underwriter, or dealer, without fully disclosing the receipt, whether past or prospective, of such consideration and the amount thereof.”
According to the SEC, “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.”
In 2017 crypto-related guidance, the SEC said, “Celebrities who endorse an investment often do not have sufficient expertise to ensure that the investment is appropriate and in compliance with federal securities laws.”
The SEC’s internal administrative order described Kardashian as “a well-known media personality and businesswoman.”
In December 2021, she passed California’s so-called baby bar exam on her fourth attempt. The baby bar, with a recent pass rate of only about 20 percent, is a prerequisite for taking the full state bar exam after an apprenticeship in a law office or judge’s chambers or graduation from an unaccredited law school.
The one-day baby bar gives candidates seven hours to complete four essay questions and 100 multiple-choice questions on contracts, torts, and criminal law.
Monday’s SEC order didn’t mention Kardashian’s ongoing legal studies.
As part of the settlement, she agreed to continue cooperating with the SEC in its “investigation of this matter.”
She also agreed for three years to “forgo receiving or agreeing to receive any form of compensation or consideration, directly or indirectly” for touting crypto that’s subject to SEC regulation.