Reality TV star and online influencer Kim Kardashian’s dip into the cryptocurrency world hasn’t gone very well. Her promotion of Ethereum Max, an altcoin fraught with red flags that resembled a pump and dump scheme, last year now has her wrapped up in a class action lawsuit alongside other celebrity endorsers and caught the eye of the U.S. Securities and Exchange Commission.
While the lawsuit remains ongoing, the SEC took action on Monday, levying a $1.26 million fine and banning Kardashian from promoting crypto securities for three years. SEC chair Gary Gensler touted the penalties 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.”
Gensler is right to an extent. $1.26 million is a nice, large number to tout as a warning as crypto and web3 projects increasingly take on a marketing philosophy almost exclusively centered on celebrity endorsement. The SEC can simultaneously point to the penalty as an example of holding bad actors accountable, finally answering the call of many who clamor for increased consumer protections in web3 systems inherently resistant to them.
I’m sure the video team at the SEC enjoyed the chance to poke fun at the “to the moon” crowd as well. Who wouldn’t?
Today @SECGov, we charged Kim Kardashian for unlawfully touting a crypto security.This case is a reminder that, when celebrities / influencers endorse investment opps, including crypto asset securities, it doesn’t mean those investment products are right for all investors.
— Gary Gensler (@GaryGensler) October 3, 2022
But all of this falls somewhat flat under minimal scrutiny. The fine Kardashian is forced to pay amounts to less than one-percent of her net worth, and banning her from promoting crypto for three years won’t affect her bottom line much as she barely dipped a toe into that world to begin with.
While there is plenty of goodwill and some promise that government bodies will hold influencers associated with web3 spaces accountable, the SEC’s ruling comes in the wake of multiple crypto scams with close ties to celebrities. Multiple NBAplayers and musicians have let NFT projects fall dormant after making bank on initial mints and walking, leaving buyers with digital assets that plummeted in value. YouTubers Jake and Logan Paul have been accused of promoting multiple crypto and NFT scams, with Jake being a named defendant in a class action lawsuit for promoting the cryptocurrency Safemoon.
Multiple members of Faze Clan were either suspended or dismissed last year after allegations that they profited off of an alleged pump-and-dump scheme associated with the charity crypto token Save The Kids token.
Kardashian isn’t even the most egregious celebrity wrapped up in the Ethereum Max situation. Boxer Floyd Mayweather Jr. is a defendant in the same class action lawsuit as Kardashian and has a years-long history of promoting crypto projects without disclosure of payment and NFT projects that were abandoned after their initial mint. In fact, Mayweather has already paid an SEC fine of just over $600,000 in 2018 for promoting multiple initial coin offerings.
Knowing this history severely undercuts the SEC’s message of holding celebrity endorsers accountable. It’s a twofold problem: keeping up with the number of influencers whose practices run afoul of SEC regulations and issuing penalties that are less than slaps on the wrist to their balance sheet.
The SEC and other government agencies can remind influencers all they want about the issue, but it isn’t going to stop bad actors within both the influencer and web3 realms without increased oversight and stiffer penalties. Drops in the bucket cannot cut it.