The SEC catches up with the Kardashians
Updated: Oct 4, 2022
The US Securities and Exchange Commission (SEC) has announced charges and settlement against Kim Kardashian, best known for her family's reality TV show and her father defending O.J. Simpson, and launched it's own influencerish video warning of the dangers of influencers touting products.
The SEC Order found that Ms Kardashian failed to disclose that she was paid USD$250,000 to publish a post promoting a crypto-asset, which the SEC has alleged is a security (but noting that no action has been taken by the SEC against the token issuer).
The Order said the following about the token, which broadly aligns to the tenets of the Howey test in the USA:
Based on [the issuer's] marketing materials, as well as public statements by [the issuer's] affiliates, ... website, and ... social media handles, purchasers of ... tokens would have had a reasonable expectation of profits from their investment in the tokens.
[Issuer] frequently touted the token’s rise in price on its social media pages as it offered and sold ... tokens.
Based on ... public statements, purchasers of the ... tokens would have had a reasonable expectation that [the issuer] and its agents would expend significant efforts to develop the [issuer's] platform, which would increase the value of their ... tokens, resulting in investor profit.
... marketing materials highlighted that the [issuer] and its agents would ensure a secondary trading market for ... tokens by creating a trading market for ... tokens... [and] also emphasized the purported expertise of the ... management.
marketing materials, moreover, contained numerous direct statements that the ... tokens would rise in value as a result of the efforts of the [issuer] and its agents, including by touting future deals and relationships that would “drive value.”
[Issuer] also promised to develop certain “token enhancements,” including “additional tokenomics to enhance economic value,” future rewards and staking programs, national sporting and event partnerships, and a general expansion of the ... token ecosystem.
SEC Director of Division of Enforcement, Gurbir Grewal said:
The federal securities laws are clear that any celebrity or other individual who promotes a crypto asset security must disclose the nature, source, and amount of compensation they received in exchange for the promotion
The SEC Chair, Gary Gensler, approached this prosecution as he does similar regulation by enforcement, by declaring in the complaint that a crypto-asset is a security, and moving on to the consequences of those who have dealt with the crypto-asset as if it is a security. Ms Kardashian has agreed to pay a USD$1.26M fine for her actions.
Simultaneously, Mr Gensler starred in a slick video warning about influencers promoting financial products, which is a far cry from the dry presentations one would expect from regulators.
While it only has 6,800 views as of time of publishing, it seems that the SEC is keeping up with the Kardashians in more ways than one.