By: Victoria Nash
Kim Kardashian is known as the Queen of Social Media, but it looks like her and her team forgot to research before promotinga crypto currency. Kim Kardashian and other influential celebrities were touting a crypto currency called EthereumMax,now called Ethereum, without disclosing their compensation for the post. When influencing for a crypto currency, the U.S. Securities and Exchange Commission (“SEC”) has strict guidelines to protect investors. The Securities Act requires those who tout a form of security (tradeable financial instrument that holds money) to disclose their compensation to prevent deception of investors. Surprisingly, this anti-touting clause waspresent in the Securities Act since 1934. Clearly, these celebrities’ business teams need to research more before accepting deals.
Kim Kardashian is a mother, law student, businesswoman, entertainer in reality television, and a social media influencer. Kim Kardashian has over 360 million followers on Instagram with 6,000 posts. Her Instagram posts consist of promoting her clothing and make-up lines, such as Skims and SKKN. Earlier in her career she dove into other influential posts such as Silly Bandz, at home hair removal products, OPI nail polish, Quicktrim weight loss supplements, and many other ventures.Luckily for Kim, with the launch of social media, her span of influence became even larger. However, the larger the influence the more unfamiliar influencing opportunities, such as cryptocurrency, emerge.
Kim Kardashian was greatly compensated for writing on her Instagram story that consumers should buy EMAX tokens. Her Instagram story also contained a link which providedinstructions on how to purchase EMAX tokens, but not once did it mention that she was getting paid to promote the product. She was compensated $250,000 for posting on her story but had to pay it all back and then some for her failure to disclose the paid nature of the promotion. According to the Press Release from the SEC, Kardashian agreed to settle charges for 1.26 million in penalties, disgorgement, interest, and cooperate with the Commission’s ongoing investigation. She also agreed not to promote any crypto asset securities for three years.
Interestingly, the SEC Chair Gary Gensler reminded investors “when celebrities or influencers endorse investment opportunities, including crypto asset securities, it doesn’t mean that those investment products are right for all investors.” Gensler further encourages investors “to consider an investment’s potential risks and opportunities in light of their own financial goals.” Consumers should have the same standing as investors when it comes to social media cyber marketing campaigns. Influencers should do more than #AD and disclose to their potential consumers how much they are being compensated for their promotional post. According to the Federal Trade Commission, from January 2021 to June 2023,businesses defrauded American consumers by 2.7 billionthrough social media.
Clearly American consumers need more protection on social media. The FTC and SEC should start cracking down on these fraudulent social media accounts and protect consumers in the same ways they protect high value investors. Social media influencers should disclose their compensation per promotional post to ensure transparency between consumers and businesses.Once there is more transparency between consumers and businesses, consumers and investors can make better financial decisions on their investments.
Student Bio: Victoria Nash is a second-year J.D. candidate at Suffolk University Law School and is a staff writer for the Journal of High Technology Law. Victoria is passionate about Environmental, Maritime, and Patent Law. She received a Bachelor of Arts Degree in Sociology on the Social Justice Track from the College of the Holy Cross.
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.
