Kim Kardashian has been slapped with a $1.26m fine for advertising EthereumMax, a cryptocurrency, on her Instagram page.
The reality TV star also agreed not to promote crypto asset securities for three years. Her lawyer stated that “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. 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.”
Kim Kardashian’s lawyer
According to the US Securities and Exchange Commission, Kim Kardashian had received $250,000 for advertising the cryptocurrency, without disclosing she had been paid to do so.
Kim Kardashian is among three celebrities being sued by investors in the EthereumMax crypto-currency. Other defendants include boxer Floyd Mayweather Jr, basketball player Paul Pierce, and the currency’s creators.
The legal action alleged they had collaborated to “misleadingly promote and sell” the cryptocurrency in a “pump and dump” scheme designed to inflate the price before selling to investors. EthereumMax disputed the allegations at the time. In spite of its name, EthereumMax has no legal or business connection with the Ethereum cryptocurrency.
Complaints filed against celebrities
The class action claims EthereumMax operated a “pump and dump” scheme – where misleading marketing is used to inflate the price of an asset then sold to unwitting investors at a profit.
The complaint filed with the Central District Court of California alleges the “company’s executives, collaborating with several celebrity promoters” made “false or misleading statements to investors about EthereumMax, through social-media advertisements and other promotional activities”.
The defendants “touted” the ability of “investors to make significant returns”. This, they explained resulted in an artificial increase in the price of the crypto-currency, “causing investors to purchase these losing investments at inflated prices”.
The defendants noted that the move enabled the executive staff of EthereumMax named in the legal action to “sell their EMax tokens to investors for a profit”.
“In plain terms, EthereumMax’s entire business model relies on using constant marketing and promotional activities, often from ‘trusted’ celebrities, to dupe potential investors into trusting the financial opportunities,” the court filing alleges.
The suit also alleged that former National Basketball Association (NBA) player, Mr Pierce, promoted EthereumMax in a “widely discussed” post on Twitter, in May 2021, “praising EthereumMax’s ability to make money for him”.
At the same time, EthereumMax started to use former world champion Mr Mayweather’s boxing match with YouTuber, Logan Paul, to promote the crypto-currency.
Mr Mayweather was said to have also promoted EthereumMax at a crypto-currency conference.
Additionally, reality-TV personality Kim Kardashian, the complaint alleged, published an Instagram post, saying: “This is not financial advice but sharing what my friends tell me about the EthereumMax token”.
The head of the UK Financial Conduct Authority, Charles Randell, later indicated that Ms Kardashian had “asked her 250 million followers to speculate on crypto tokens”, suggesting the post – marked as an advert – may have been the “financial promotion with the single biggest audience reach in history”.
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