In a press release (#2002-183), issued by the Securities and Exchange Commission (SEC) on October 2, 2022:
The SEC announced charges against celebrity Kim Kardashian for promoting a crypto asset security on social media without disclosing that she was paid $250,000 to publish the post on her Instagram account. The post promoted a crypto asset security being offered by EthereumMax (EMAX tokens). Kardashian’s post included a link to a website where potential investors could purchase EMAX tokens.
Without admitting or denying the charges, Kardashian agreed to pay approximately $260,000 in disgorgement, plus a $1M fine, and to refrain from promoting any crypto asset securities for three years.
In an “SEC Statement Urging Caution Around Celebrity Backed ICOs” published by the SEC Division of Enforcement and SEC Office of Compliance Inspections and Examinations, issued on, SEC stated its position on these types of promotions:
“Any celebrity or other individual who promotes a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion. A failure to disclose this information is a violation of the anti-touting provisions of the federal securities laws. Persons making these endorsements may also be liable for potential violations of the anti-fraud provisions of the federal securities laws, for participating in an unregistered offer and sale of securities, and for acting as unregistered brokers.”
This action should be considered a lesson to everyone promoting securities (not just crypto) on behalf of others, that:
- Disclosure of compensation when promoting securities on behalf of others is mandatory,
- Depending on how you are compensated, you could be charged with acting as an unlicensed broker-dealer,
- If does not qualify for an exemption from securities registration or is not registered as a public company, you could be charged with participating in the unregistered sale of securities.
The SEC stated that it will “continue to focus on these types of promotions to protect investors and to ensure compliance with the securities laws.” And regardless of who or how wealthy you are, no-one is above the law.
Read the articles on our Website entitled “Paying Finder’s Fees in a Real Estate Syndication” and “Can I Use a Consulting Agreement to Raise Money for Someone Else’s Syndicate?”