This just in! According to an article in the Wall Street Journal just a few days ago, Kim Kardashian will pay $1.26 million to settle a claim she had failed to disclose she was being compensated to promote a crypto, the Securities and Exchange Commission said. The reality-TV star endorsed EthereumMax tokens in an Instagram post for $250,000, in violation of an “anti-touting” law. The settlement includes a $1 million penalty, plus her agreement not to take money for promoting tokens for three years. Celebrities have been cashing in on crypto as an asset aimed at individual investors, and the SEC's announcement fueled speculation about who else may be in regulatory crosshairs.1
I found the latest news surrounding EthereumMax and Kim Kardashian a bit humorous. Apparently, Ms. Kardashian committed a crime – one which comes with a hefty fine (for most people, but probably not Ms. Kardashian) — by endorsing a product and not disclosing the amount she was paid.
Hmmm… don’t actors get paid to endorse products and services on a pretty regular basis? William DeVane pitches gold. Rosamund Pike endorses some investment product, the name of which currently escape me. Martha Stewart hawks pet food. (Oh, that’s right. She actually went to jail, didn’t she?) One of my favorite actors, the guy from Magnum P.I., sells reverse mortgages.
I guess the real issue stems from the fact that Kardashian endorsed an investment product. But, what about these actors who pitch products for Schwab, Fidelity, and Vanguard? I don’t recall ever seeing a disclaimer at the bottom of the screen that says, “Actor Bob Jones was paid $150,000 for endorsing this product. Beware, he’s simply a paid actor and probably knows less about investing than you do.” I guess the SEC is okay with this because these pitchpersons are not celebrities. Apparently, they’re concerned that I’m more likely to be taken advantage of by a self-proclaimed, reality television “star” in a tight-fitting dress than some guy from Central Casting in business casual.
And what about this? What is an “anti-touting” law? Could that term be any more vague? Everyone on television, social media, the outdoor boards on the highway, the print media (if anyone is even paying attention to that anymore) is hawking or “touting” something…. And BTW, getting paid to do it. “Celebrities have been cashing in on crypto as an asset aimed at individual investors,” the article says. Like cashing in on selling is something new. And remember Matt Damon’s crypto commercial “Fortune favors the Brave”? I don’t recall any mention of his compensation. Maybe he was never paid. Or, maybe he took his comp in crypto, poor guy.
In explanation, the head of the SEC, Chairman Gary Gensler, had this gem of wisdom to offer… on none other than Twitter!? “When celebrities / influencers endorse investment opps, including crypto asset securities, it doesn’t mean those investment products are right for all investors.” Wow, thank you, Mr. Gensler. So, perhaps that nearly-one-hundred-grand, “influencer-endorsed” Grand Cherokee isn’t for me after all; it could be that I’m simply being seduced by an influencer/endorser.
Do we know if EthereumMax is even a good product? No. Is it risky? Of course, all investment products are. Is eating red meat risky? One could make the argument that it is. False and misleading advertising has been with us since the first soap commercial aired in black and white on one of three networks. I wish that the FCC was just as diligent about scrutinizing claims about advertised products as the SEC seems to want to be. How many times have you seen commercials for supplements that promise everything from losing weight to becoming “more of a man” that mention, in type at the bottom too small for the average human being to read, that the product claims have not even been reviewed by the FDA?
Mr. Gensler goes on to say that “Ms. Kardashian’s case 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.” Am I a Kardashian fan? Hardly. Do I think that endorsers, simply because they’re celebrities, should be forced to disclose their compensation? No. I take every sales pitches, whether supplements, automobiles, fragrances, or investment products, whether celebrity endorser or just-starting-out actor, with a grain of salt. Maybe a bit more salt when it comes to investments as they’re much more of a “considered” purchase, but a healthy dose, nonetheless.
Ironically, and this is always the case, I now know more about EthereumMax than I ever wanted or needed to… and I never even saw Ms. Kardashian’s pitch.
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1Cate Chapman. LinkedIn News. October 4, 2022. https://www.linkedin.com/news/story/kim-kardashian-fined-for-crypto-ad-6021218/