What Kim Kardashian’s SEC fine means for crypto gold rush

Kim Kardashian has just been fined over a million dollars for promoting a cryptocurrency online — but she’s not the only celebrity with connections to the world of crypto.

For the many other A-listers who have lined up behind cryptocurrencies, crypto companies, and non-fungible tokens or NFTs, Kardashian’s $1.26 million settlement with the Securities and Exchange Commission could be a game changer in how Hollywood’s biggest names take it highlight relatively unregulated online economy.

“The SEC aims to initiate enforcement actions … that will draw widespread attention and influence the behavior of market participants going forward,” said Philip Moustakis, counsel at the law firm Seward & Kissel. “Obviously, a lawsuit against Kim Kardashian is ideal for those purposes.”

In short, he continued via email, the SEC hopes that Kardashian — a media personality both online and offline — “will serve as an influencer of a different kind.”

Kardashian was fined for failing to disclose that she was paid for an Instagram post promoting EthereumMax crypto tokens, but she’s not the first big name to get into regulatory scrutiny over crypto deals difficulties.

Floyd Mayweather Jr. and DJ Khaled were both 2018 charged for not disclosing being paid to promote various crypto investments and in 2020, the same happened to Steven Seagal.

According to a former SEC official a warning about celebrity-backed cryptocurrencies that the agency released in 2017 was largely inspired by Mayweather, Jamie Foxx, and Paris Hilton promoting crypto assets.

As such, the ex-official said, Kardashian’s fine doesn’t necessarily signal a change in direction for the SEC, but rather a stronger stance than the one the agency took five years ago.

“By presenting this case, [the SEC] basically said, ‘Look, you all got a fair warning. Now we’re bringing a case,'” the former officer, who asked to remain anonymous to protect his relationship with former colleagues, told The Times. “That definitely gets celebrities noticed.”

It can be difficult to talk about crypto without mentioning the sometimes bizarre overlap that the still relatively niche financial technology has with the entertainment industry. In January Hilton spoke with Late night TV host Jimmy Fallon on the anthropomorphic monkey tokens they both own. Less than a month later, marquee names like Larry David and LeBron James Starring in cryptocurrency ads during the Super Bowl. Matt Damon has promoted crypto investing as an act of doing world-historical braveryand last year crypto firm MoonPay made a not-so-subtle cameo in a music video with Post Malone and The Weeknd.

There are still plenty of questions why exactly so many celebrities have jumped on the crypto hype train – and what financial incentives they could have for it.

When the crypto market entered a period of sustained downturn – some celebrities, including Fallon, have AWAY NFTs from her Twitter profile pictures — Kardashian’s fine shows that regulators, at least, are still watching the space with interest.

“The SEC and regulators around the world often target what they call asymmetric information — when one person knows something that others don’t, making an otherwise fair transaction an instance of potential manipulation,” said Mike Castiglione, Director of Regulatory affairs for digital assets at regulatory compliance firm Eventus, said via email. “This week’s enforcement actions mean that celebrities, or anyone else, should consider whether they may appear to be withholding information when making crypto sponsorship deals.”

Celebrities who are “open and transparent” can add credibility to a crypto asset by tying it to a public figure’s reputation, said Castiglione, whose company counts multiple cryptocurrency trading platforms among its clients. But “they can also be abused for pump-and-dump schemes,” just like other types of assets, he added.

This isn’t the first time A-listers have come under regulatory scrutiny for their crypto leanings.

“The SEC has been pursuing other celebrities for some time for promoting tokens that the SEC believes are securities,” attorney Jason Gottlieb, a partner at Morrison Cohen and its chairman of corporate and regulatory agencies, said in an email. “The new point in the [Kardashian] The settlement is that the token in question has been flagged as a security” – although, he added, “there has been no action taken against this token that has determined that it is a security.”

The case could also be a sign of systemic problems.

Rep. Brad Sherman (D-Northridge), maybe Congress’ foremost crypto skepticsCalled Kardashian’s lack of coverage a “blatant violation” of SEC law, but said her high-profile promotion of the cryptocurrency also hints at a larger business using influencers to boost crypto prices.

“Just the fact that you’re getting paid to promote it means there’s an ongoing business that’s driving the price up,” Sherman said, adding that he wants higher penalties, and not just for Kardashian . “I believe Kardashian is either a voter or lives just outside of my county, so I wish her the best,” he said. “But in this case, she should have gotten better legal advice.”

Times contributor Freddy Brewster contributed to this report.

https://www.latimes.com/entertainment-arts/business/story/2022-10-05/does-kim-kardashians-crypto-fine-mark-the-end-of-the-crypto-celebrity-golden-age What Kim Kardashian’s SEC fine means for crypto gold rush

Sarah Ridley

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