By: Catherine Nicholson
On June 13, 2021, Kim Kardashian touted a cryptocurrency asset security on her Instagram account in exchange for $250,000. The asset promoted in that Instagram post was a token offered by EthereumMax: “EMAX Tokens”. EMAX Tokens are digital currency that purports to give owners of the Token special perks such as “special access” to popular restaurants and clubs. The project’s website also claims that owners of the EMAX Tokens receive a 3% share of the value of every transaction. EthereumMax (“EMAX”) is an online company with a public website that offers digital cryptocurrency, (“EMAX Tokens”) for purchase from the public. The value of an EMAX Token is based on its “hype,” in that as investors and promoters – like Kardashian – promote the Token, the more people invest, and the value of the Token increases.
Since Kardashian’s post, the Token’s value has dropped approximately 95%. Investors subsequently filed a lawsuit against Kardashian amongst other celebrities who participated in promoting the Token. The SEC has additionally imposed charges against Kardashian pursuant to Section 17(b) of the Securities Act for touting a security without fully disclosing the amount she was compensated in exchange for this promotion. Section 17(b) of the Securities Act makes it unlawful to tout a stock without disclosing the nature of any securities. Failing to disclose her compensation violates the anti-touting provision of the federal securities laws. The EMAX Tokens promoted by Kardashian were offered and sold as investment contracts and therefore are considered “securities” pursuant to Section 2(a)(1) of the Securities Act. Kardashian and the SEC have made the decision to settle the violation by her paying disgorgement of $250,000, pre-judgement interest of $10,415, and a civil money penalty in the amount of $1,000,000 to the SEC and complying with other provisions of their settlement agreement.
Kim Kardashian is a social media star, television personality, business entrepreneur, and is now an aspiring attorney. In December of 2021, Kardashian law exam, signifying the end of what would be her first year in a traditional law school setting. Though she has a long way to go in her legal education journey, this SEC violation may affect her ability to become an attorney. When aspiring attorneys apply for bar admission, among other materials, they must submit a Character and Fitness Application to the state bar in which they are seeking admission. Though it varies by jurisdiction, applicants are typically required to disclose any criminal and civil violations, including everything from convictions, traffic tickets that led to fines, or drivers’ license suspensions.
The Character & Fitness Application serves as a way to perform a background check on applicants seeking admission to a state’s bar association. Additionally, this application ensures that the applicant is “morally fit” to practice law. Generally, any evidence of prior misconduct in a professional role or any indications of dishonesty or disrespect for the law is relevant to this determination. If the bar association to which you are seeking admission deems that the applicant lacks the character and fitness required, they may be denied admission.
The SEC’s charges imposed upon Kardashian may present itself as a problem when Kardashian submits her Character and Fitness Application. As she will be required to report the charges, any failure to fulfill the terms of the settlement may impose further complications when seeking bar admission. Several attorneys have offered opinions on the matter and predict the effect this will have. “This is a violation of securities laws and when aspiring lawyers go before the bar they are judged on their character . . . this is most certainly something that would come up if she were trying to get admission to the bar. . . This might not ultimately stop her from becoming a member of the bar, but it is likely to raise a flag that must be dealt with.”
Throughout our legal education, and in our legal careers, our community is consistently reminded that we are representing an entire profession, and any actions we take – inside and outside of the legal and education field – have the potential to be scrutinized. While most law students and practicing attorneys do not live as much of a high-profile and glamorous life as Kardashian, how will her future actions portray the legal profession?
The idea of an already controversial and highly scrutinized celebrity entering the legal profession may pose to be worrisome in that her actions – as well as those seeking admission and already admitted to the bar – may be reviewed by the Board of Bar Overseers, and may impose penalties, suspend, or revoke a bar license in response to those actions.
While it is admirable that Kardashian is working hard to become a member of the legal profession, it does evoke the concern that her past violation, her controversial past, and future actions may tarnish the reputation of our community. While this SEC violation may alone not be enough to deny her admission to the California State Bar, it is possible that this violation in culmination with her other controversial past actions be sufficient to disallow her from becoming a member of the California State Bar.
Student Bio: Catherine Nicholson is a second-year law student at Suffolk University Law School. She is a staffer on the Journal of High Technology Law. Catherine received a Bachelor of Arts Degree in English and Spanish from the University of Connecticut.
Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.
