Kim Kardashian penalised for non-disclosure
Look, I’m not entirely sure where Kim Kardashian has got to in terms of her legal training, but if your career goal is to be called to the bar instead of the nail bar, then surely staying on the right side of the law should be a priority, so goodness only knows what Kimmy was up to when she hyped a cryptocurrency token last year.
In June 2021, she posted an Instagram story inviting her followers – and remember, at the time of writing she has over 325 million of them – to invest in a cryptocurrency token called EMAX, which was being sold by a company called EthereumMax. She did say she was just sharing information that friends had given her and she was clear that she wasn’t dispensing financial advice. She also included #ad, which was the responsible thing to do, but she didn’t reveal that she had been paid to promote EMAX and she didn’t disclose exactly how much she had been paid.
In the States, regulating influencer behaviour largely comes under the remit of the Federal Trade Commission (FTC), which can and does fine influencers. On this occasion, however, our Kim fell foul of the Securities and Exchange Commission (SEC), which is charged with protecting investors and promoting a market environment that is worthy of the public’s trust.
According to the SEC, federal law states that any celebrity or indeed any person who promotes a ‘crypto asset security’ must disclose the nature, source and amount of compensation they have received in exchange for the promotion. Which is exactly what Kimmo didn’t do.
As a result, Kimmsie has agreed to pay $1.26 million penalty to the SEC and not to promote crypto-related products for three years. It’s important to note, however, that she hasn’t accepted she did anything wrong. No doubt that will play well when she puts on a curly wig and flappy black gown, and joins the legal profession (OK, I know they don’t wear those in American courts – I was just wondering whether even the Kimmster could look good in that garb).
More seriously, though, it’s essential that celebrities are transparent about whether they have been paid to endorse any product, but particularly so with financial products. There’s what looks like a fairly detailed explanation of the pros and cons of cryptocurrencies here, but most people, me included, are not crypto experts.
Last year there was quite a crypto goldrush on and a wide range of celebrity influencers could be spotted exhorting their followers to jump on the bandwagon and invest in crypto. Now the crypto craze has died down, the value of many of those crypto coins and currencies has plummeted, leaving investors out of pocket.
I reckon Ms Kardashian could probably take the hit, but I doubt it’s the same for all her followers. They needed to know that she was receiving financial recompense for the endorsement, which is why it matters that she wasn’t upfront about taking payment for the promotion. I do wonder, though, was she paid in EMAX or did she make sure she got her fee in dollars?
Sarah Burns is Prizeology’s Chief Prizeologist and an industy expert in promotional compliance.