When it comes to marketing, one time-honored tradition is the celebrity endorsement. Turn on your TV or open up your web browser and you’re likely to see any number of athletes, actors and influencers trying to sell you anything from cars to credit cards. Arguably the biggest celebrity influencer today is Kim Kardashian. So, we should not have been surprised to see Kardashian shilling a new crypto token – and we should not be surprised to see the SEC stepping in to fine her.
According to a press release from the SEC, Kardashian failed to disclose that she was paid $250,000 to publish a post on her Instagram account regarding EMAX tokens, a crypto asset security offered by EthereumMax. The published post included a link to the EthereumMax website, where investors could potentially purchase the EMAX tokens. Kardashian is just the latest in a line of celebrity endorsers who have been penalized by the SEC. In 2018, boxer Floyd Mayweather was fined $600,000 and music producer DJ Khaled was fined $150,000 for also failing to report the fees they were paid to endorse cryptocurrencies. In 2020, actor Steven Seagal was also fined.
Kardashian, who neither confirmed nor denied the allegations, agreed to pay the fine, even though, according to Forbes, some experts have argued that her “#ad” was enough to satisfy the SEC’s rules. This means that Kardashian believes it is a better business decision to pay the fine and move on. This may be because she is reportedly worth $1.8 billion. According to CNN, Kardashian’s $1.26 million fine is the equivalent of less than $100 for the average American family.
As reported by Bloomberg, Christian Schultz, who formerly worked in the SEC’s enforcement division said, “The SEC has and will continue to aggressively look at how celebrities and social media influencers use their public profiles to encourage Main Street America to invest in crypto asset securities.” Kardashian is just the latest in a line of big names the SEC has chosen to pursue. Throughout its history, the SEC has made a point to go after celebrities: Martha Stewart, Mark Cuban and Elon Musk are just a few.
This is not an argument for whether celebrities should or should not be allowed to tout cryptocurrency, nor is this an argument for whether or not they should be punished for breaking the rules. What this goes to show is that the SEC is dedicated to regulation through intimidation and enforcement. “Are other celebrities quaking in their boots right now? Absolutely,” said John Reed Stark, former chief of the SEC Office of Internet Enforcement, as reported by Bloomberg.
The $1.26 million is a slap on the wrist for Kardashian, but it makes for good headlines. It helps the SEC to make a grand statement, but it does little to provide education or best practices, and it does little to nothing to help professionals. Many regulatory groups in other industries work to actively correct the bad behavior they find, and they often encourage the professionals within their group to improve. In many cases, removing a license is the last resort.
The SEC, however, seems to actively work to crush the livelihood of so many smaller firms. For Kardashian, this punishment is a blip on her radar, but for many independent professionals that kind of penalty would ruin their business.
According to the “About” section on the SEC’s website, the SEC “work[s] together to make a positive impact on America’s economy, our capital markets and people’s lives.” Is using a federal agency’s power and near unlimited resources to destroy the livelihood of a business person who unknowingly –and without intention– violates one of the countless number of codes established by the SEC really making a positive impact on society? Certainly, there should be laws in place, and we should work to protect investors, but is strict, potentially arbitrary, enforcement really helping the industry?
Celebrities are low-hanging fruit for the SEC. Their well-known status and deep pockets help the SEC to make a splash, which contributes to the image that the SEC is all-powerful. It is not, however. It is an independent agency that is designed to serve and protect investors and those of us who work in the financial industry.
What do you think? Should the SEC continue to rule through business-crushing enforcement? Or could there be a better way? Please continue to send me your experiences with the SEC, FINRA and other regulatory agencies at Publius.Connect@gmail.com. I know that we can create an agency that truly protects and supports those of us in this space.
Editor’s note: The author of the preceding article is a chief executive officer in the financial services industry, who, for fairly obvious reasons, elects to share his thoughts on this subject anonymously. The DI Wire does not normally publish articles that do not disclose the author. In this instance, however, we have allowed it given the nature of the piece, the importance of open discussion and varying viewpoints, and the fact that we have personally confirmed Publius’ identity.
The views and opinions expressed in the article are those of the author and do not necessarily reflect the views of The DI Wire.