Kim Kardashian has been fined by a US financial regulator for failing to disclose that she was paid for promoting a crypto project on her Instagram page.
The SEC’s charge against the reality TV star is a warning to other celebrities who are considering a side income by promoting crypto projects to their legions of followers without disclosing the risks and failing to include that they are paid promotions.
Below is a list of five famous names who have used their celebrity status and social media reach to endorse cryptocurrency schemes.
There are a multitude of cryptocurrency projects, approximately 20,268 and counting, and the SEC are coming to the conclusion that they are all unregistered securities, apart from bitcoin.
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Most of the cryptocurrency projects that spring into life on a daily basis form around a core unit of developers and marketing personnel who will decide upon a roadmap that they hope will send their token, “to the moon”.
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A date will then be set for an initial coin offering (ICO), where a portion of the crypto token that is attached to the cryptocurrency project is sold to the public, and the other portion is kept by the development team.
The next task is ensuring the public knows that the token is out there and what its use case is, and more importantly, that the price of the token will rise manifold.
A marketing wallet is set up by the team behind the cryptocurrency project, with a proportion of the tokens set aside to help coordinate a ‘crypto-community’ of fans on Telegram and Discord.
Discord and Telegram are social media channels that form the backbone of crypto-community activity.
The Discord channel in particular is favoured as it allows for private chat rooms where ‘the community’ can communicate and plan how to advance the cause of the cryptocurrency that they are rallying behind.
The marketing wallet attached to a certain cryptocurrency will also be used to pay for PR firms, advertisement slots and celebrity endorsement of the token.
All of these stages of promotion have almost convinced the SEC that most cryptocurrency projects should now be defined as unregistered securities.
This is a problem for celebrities who were paid to endorse these projects during the retail investor mania that poured into the crypto-ecosystem during 2020 and 2021.
They’re now threatened with the possibility of SEC lawsuits for endorsing unregistered securities, and Kim Kardashian is the most high-profile celebrity to date to feel the force of regulatory action.
1. Kim Kardashian
In an Instagram post in the summer of 2021, Kim Kardashian asked her 250 million followers: “Are you guys into crypto????”. The star of ‘Meet the Kardashians’ then used her influential reach to draw attention to a little-known cryptocurrency called EthereumMax (EMAX-USD).
This promotion is now the subject of an SEC lawsuit that claims that Kardashian and other celebrities received payment in advance for endorsing the EthereumMax cryptocurrency.
According to the SEC, the reality TV star had received $250,000 for advertising the cryptocurrency, without disclosing she had been paid to do so.
Kardashian has now agreed to pay a $1.26m (£1.12m) fine for endorsing the low market cap cryptocurrency on her Instagram page.
On Monday, the SEC released a press release that stated: “The Securities and Exchange Commission today announced charges against Kim Kardashian for touting on social media a crypto asset security offered and sold by EthereumMax without disclosing the payment she received for the promotion. Kardashian agreed to settle the charges, pay $1.26 million in penalties, disgorgement, and interest, and cooperate with the Commission’s ongoing investigation.”
Head of the SEC Gary Gensler stated: “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.
“We encourage investors to consider an investment’s potential risks and opportunities in light of their own financial goals.”
In a statement, a lawyer for Kardashian said she is pleased to have resolved the matter.
The statement said: “Kardashian fully cooperated with the SEC from the very beginning and she 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.”
Ethereum Max has now plummeted in value from its all-time high in the summer of 2021 and is now trading at $0.000000008649.
2. Gweneth Paltrow
Fuelled by hype and hysteria, the cryptocurrency market went from an obscure niche to a $3tn industry at its all-time high in November 2021. Since then, the macroeconomic environment has seen a steady withdrawal from the market which now hovers around the $1tn mark.
But, as early as 2018 Gwyneth Paltrow’s lifestyle brand Goop was encouraging people to learn more about the fundamentals of bitcoin and cryptocurrency, and how they can make their first investment in the crypto-ecosystem.
In December 2021, Paltrow also offered up a $500,000 bitcoin giveaway to her 2.7 million Twitter (TWTR) followers.
3. Matt Damon
Matt Damon was the face of a widely dispersed advertising campaign by Singapore-based crypto-exchange Crypto.com. The range of advertisements appeared during the height of the cryptocurrency retail frenzy in November 2021. They showed the Jason Bourne franchise star alongside the phrase ‘fortune favours the brave’.
Damon’s commercial became the subject of scrutiny over concerns it was encouraging young investors to put money into high-risk crypto assets.
As the crypto-winter shrinks marketing budgets, the Singapore-based exchange has now pulled out of a $495m sponsorship deal with UEFA for the Champions League. Crypto.com was set to replace gas company Gazprom as a sponsor after that deal was cancelled following Russia’s invasion of Ukraine earlier this year.
4. Tom Brady
Tom Brady has actively promoted crypto on his social media accounts. In September 2021, Brady and his wife, supermodel Gisele Bündchen, starred in a $20 million ad campaign for crypto exchange FTX.
The NFL star is also involved in his own crypto-related venture. Last July, he cofounded the NFT platform Autograph.
Autograph is an NFT marketplace for iconic brands and celebrity sports stars such as Tiger Woods.
In October 2021, the 44-year-old seven-time Super Bowl champion, made the offer in a tweet directed to the crypto exchange that he would “give a bitcoin” (BTC-USD) to a Tampa Bay Buccaneers fan.
On Twitter, he said: “Hey @FTX_Official, let’s make a trade…Let’s get this guy a Bitcoin.”
5. Nigel Farage
One of the key architects of Brexit, Farage has now re-invented himself as a cryptocurrency spokesman, with a video series called ‘The Truth about Crypto‘.
The GB News host will also be a guest speaker at this month’s Bitcoin Conference in Amsterdam.
He is also the public face of the investment newsletter named Fortune and Freedom.
Farage was promoting the prospects of the Basic Attention Token (USD-BAT) in cryptocurrency in March 2021.
In the video he can be heard saying, “leave means leave! Adoption means adoption! Basic attention token is now a DeFi powerhouse!”
Giovanni Compiani, an assistant professor of marketing at the University of Chicago, spoke to the New York Times and stressed that “those who promote it should be more upfront about the potential downsides”.
His research found that younger, lower-income investors tend to be overly optimistic about the crypto sector’s upward trajectory.
In the last six months, as both retail and institutional investors batten down the hatches as crypto-winter sets in, celebrities have become less vocal about their enthusiasm for specific cryptocurrency enterprises on their social media feeds.
This could be that their interest in blockchain-based innovations has waned alongside a significant section of retail investors, or the cryptocurrency firms who had been splashing out on paid celebrity promotions have reined in their
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Original posted at au.news.yahoo.com