With the U.S. Securities and Exchange Commission announcing that Kim Kardashian will pay $1.26 million for illegally promoting a junk crypto investment, there’s an obvious question in the air: which blockchain-loving celebrity will be next?
Kardashian’s charges stem from a post shared on her Instagram Story in June 2021. “ARE YOU GUYS INTO CRYPTO????” read the text, which went on to hype EMAX tokens, a security asset offered by EthereumMax. The value of those tokens has fallen by about 99 percent since its peak that May. But this collapse wasn’t Kardashian’s biggest problem. Although she included an #AD hashtag in the Story, the SEC judged that she had failed to disclose her $250,000 payment from EthereumMax for the wide-reaching endorsement. Her fine includes a repayment of this amount, plus interest, and a separate $1 million fine.
Kardashian’s lawyer released an official statement, which read: “Ms. Kardashian is pleased to have resolved this matter with the SEC. 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.”
SEC Chair Gary Gensler tweeted a video asking investors to weigh the risks of buying cryptocurrencies, particularly those hyped by famous or influential figures. “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,” he said. The replies to his post were predictably swarmed by angry crypto enthusiasts.
Nisa Amoils, a former securities lawyer and managing partner of A100x, an investment fund that targets “early-stage companies utilizing blockchain and artificial intelligence,” tells Rolling Stone that SEC Chair Gensler “goes after high-profile cases” like Kardashian’s “to garner maximum media attention and make examples as a warning.”
Two other celebrities could be on the hook for shilling EMAX: former NBA star Paul Pierce and boxer Floyd Mayweather, Jr. were this year named along with Kardashian as defendants in a class action lawsuit that alleges the trio and EthereumMax “hatched a scheme to misleadingly promote and sell” digital assets without being transparent about their material connections. Representatives for the two men did respond to a request for comment.
Kardashian’s fine has also launched a conversation about the ethics of crypto promotion. Jacob Silverman, a journalist on the crypto beat, tweeted that late-night TV host Jimmy Fallon could so be in the SEC’s crosshairs, having “repeatedly pitched” digital assets online as well as on his show — a painfully awkward interview in which he discussed Bored Apes with fellow NFT collector Paris Hilton was the most memorable example. (Neither Hilton nor Fallon returned a request for comment.) The actor Ben McKenzie, a prominent critic of cryptocurrency working on a book on the topic with Silverman, tells Rolling Stone that he believes Kardashian is the first of multiple celebrities who will be caught up in these investigations, noting that she has promised to cooperate with the SEC as they continue the probe, and that “others involved in EMAX (Mayweather for example) have been fined previously.” This earlier charge came in 2018, when Mayweather and music producer DJ Khaled paid hefty fines for failure to disclose payments they received for advertising Initial Coin Offerings, or ICOs. The pair avoided an additional investor lawsuit. In 2020, actor Steven Seagal likewise paid a major fine for unlawfully touting an ICO. Khaled’s and Seagal’s representatives did not reply to a request for comment.
Khaled, banned from hawking securities for two years, would go on to lend his name to NFT creators; Mayweather, who caught a three-year ban, also later jumped onto the digital art trend. In March, the popular YouTuber Coffeezilla accused Mayweather of deleting tweets that promoted his first NFT project after it made him millions and left investor with worthless product — even as he was launching a new series, called “The Mayweverse.” Khaled, for his part, appears to have deleted his tweet endorsing the musical NFT brand WhoWho’s TreeHouse.
Another celebrity who climbed aboard the crypto bandwagon only to partially scrub their social media of several posts about it is Reese Witherspoon. “Just bought my first ETH! Let’s do this #cryptotwitter,” she tweeted in September 2021. That tweet — which was seen as an announcement of her interests, not a paid endorsement — has vanished, but she, too, moved into the NFT space, backing women-led collections. Her representatives did not answer a request for comment, but recently said that Witherspoon is uncompensated for her NFT posts.
Not all the bullish investors have gone back to revise their history of crypto dealings. Paul Pierce’s tweet pushing EMAX in May 2021 is still up. In it, he claims that the tokens made him more money than he earned in salary as an analyst for the sports network ESPN, which had fired him that April.
In August, Fallon, Khaled, Mayweather, and Hilton, along with 11 others, received letters from Truth in Advertising (TINA), a nonprofit that fights “false advertising and deceptive marketing.” Witherspoon had received one — as did Justin Bieber — a month before. The memos warned the celebrities to reveal any material connections to the NFT companies they’ve been promoting and take the necessary precautions to protect their fans from making risky investments. In a follow-up letter, TINA recorded a denial from Witherspoon’s team that her active involvement in NFTs benefits her personally. TINA argued that, in fact, she is increasing the value of her own crypto assets by encouraging others to enter the market.
Kardashian’s case “did not teach anything new since Mayweather,” says Amolis, referring to the 2018 fines levied against him and Khaled, who were charged on the same grounds. “What comes next,” she adds, “is more enforcement actions until clear legislation is passed [and] a regulator is chosen to get control over the space. Under the SEC, if there is no disclosure that a celebrity is being compensated, Gensler will use the consumer protection argument to find fault.”
Because stars like Matt Damon, Larry David, and Tom Brady appeared in clearly paid commercials for the platforms Crypto.com and FTX, they are probably less exposed on the legal front, according to MarketWatch. On the other hand, London School of Economics visiting fellow Garrick Hileman told the New York Post that they could become targets in the “next frontier” of an SEC crackdown. Since May 2021, Brady has maintained a “laser eyes” profile image on Twitter, a meme indicating his personal support for Bitcoin (to our knowledge, he was not paid for this). His representatives, and those for David and Damon, did not answer requests for comment.
If as TINA suspects, more A-listers are concealing their financial ties to the crypto companies they’re recommending from personal accounts, they could well run afoul of Gensler. The Federal Trade Commission has for years been curiously lax about penalizing the Kardashian clan for not identifying regular product ads on their channels, but TINA has had success in pressuring Khaled to delete his undisclosed Instagram ads, which are typically for premium alcohol brands. In any event, it looks as if the SEC has once more signaled that it’s eager to take action where the FTC has not.
When reached for comment on the continuation of the EthereumMax inquiry, and potential future charges against Kardashian-level offenders, an SEC spokesperson said only that the agency “does not comment on the existence or nonexistence of a possible investigation.” Anyone into financial speculation, however, may want to start a betting pool and put their money on some big names.