These Four Celebrities Endorsing Crypto Faced the Wrath of Regulators

On Monday, Kim Kardashian settled a $1.26 million case with the Securities and Exchange Commission (SEC) for not disclosing that she had been paid for an Instagram advert promoting crypto assets.

The SEC said that Kardashian failed to disclose a $250,000 payment for one social-media advert promoting EthereumMax's crypto asset security EMAX tokens.

The advert was posted in June 2021 to her 331 million followers, with the caption: "Are you guys into crypto???? This is not financial advice but sharing what my friends just told me about the Ethereum Max token! A few minutes ago Ethereum Max burned 400 trillion tokens-literally 50% of their admin wallet giving back to the entire E-max community."

The price of the crypto asset soared initially before crashing and became practically worthless. Kardashian was also reportedly part of a larger lawsuit for falsely inflating the price of the crypto before selling it off, also known as a "pump and dump."

Kardashian, 41, is only one of many social-media influencers and celebrities who have been found shilling cryptocurrency over the last few years, and is far from the first to run afoul of the top financial regulator in the U.S.

The SEC Chair, Gary Gensler, shared a video on Twitter warning social-media users about making investment decisions based on influencers and celebrities online.

"Celebrity endorsements don't mean that an investment product is right for you, or even frankly that it's legitimate," Gensler said. "A celebrity or influencer's incentives aren't necessarily aligned with yours."

Cryptocurrency companies have routinely enlisted the help of highly recognizable public faces but, unfortunately, not every endorsement has gone smoothly.

Crypto-Celebrities

Floyd Mayweather

Kardashian is not the only celeb to have be sued as a result of promoting EMAX.

Fifteen-time world boxing champion Floyd Mayweather, 45, was fined by the SEC in 2018 for touting initial coin offerings on social media without disclosing that he had been paid to do so.

He was one of the first celebrities to be fined by the organization for promoting crypto assets.

And, in 2021, Mayweather and his team wore EthereumMax clothing to the 2021 Bitcoin Conference, which is sponsored by Ethereum's rival cryptocurrency.

Both Mayweather and Kardashian were sued in January 2022 by cryptocurrency investors for their EthereumMax endorsements. The pair were accused of not disclosing how much they were being paid to endorse crypto assets that caused "investors to purchase these losing investments at inflated prices."

DJ Khaled

Music producer, DJ Khaled, 46, was also fined over failing to disclose how much he was paid to endorse Centra Tech Inc. in the same 2018 investigation against Mayweather.

Khaled was paid $50,000 to promote Centra Tech Inc., according to the agency, while the co-founders of the firm were indicted by a grand jury in May 2018 after being charged with fraud and conspiracy.

The DJ agreed to pay $50,000 in disgorgement, a $100,000 penalty, and $2,725 in prejudgment interest, and was banned from hawking securities for two years. He went on to lend his name to NFT creators.

Steven Seagal

Hollywood actor Steven Seagal, 70, was also told to pay $314,000 to settle charges from the SEC for violating the anti-touting provisions of federal securities laws.

Regulators said Seagal was promised $250,000 in cash and $750,000 worth of B2G tokens for his work as a brand ambassador. The Under Siege star agreed to pay $157,000 in disgorgement and a $157,000 penalty, and not to promote any securities, digital or otherwise, for three years.

However, Seagal has paid only $75,000 towards his fines and has stopped responding to the SEC's repeated demands after making his initial payment, according to the commission.

Seagal has since moved to Moscow, Russia, after President Vladimir Putin issued a presidential decree in 2016 granting the actor Russian citizenship.

T.I.

In September 2020, rapper T.I., born Clifford Joseph Harris Jr., reached a settlement with the agency over fraudulent cryptocurrency offerings.

The 42-year-old was fined for promoting Flik and Coinspark, two crypto firms that were controlled by film producer Ryan Felton, who said the companies would become an streaming platform and a new cryptocurrency trading exchange.

According to the SEC, T.I.'s sold FLiK tokens on his social-media accounts while encouraging his followers to invest in the ICO. T.I. distanced himself from Felton, who was indicted over the alleged fraud, as Felton allegedly used his investors' cash to buy a Ferrari, a million-dollar home and diamond jewelry.

T.I. agreed to pay $75,000 fine for promoting ICOs from the two companies.

What Next for Crypto?

Larry Pang, the head of business development at IoTeX, a Silicon Valley-based technology platform, told Newsweek that he hopes the ruling on Kardashian will help younger investors take matters seriously.

Pang said: "The crypto space needs to be legitimized somehow. Professional investors do their due diligence, which means celebrity promotions will not influence their decisions.

"News like this should serve as a stark reminder and warning to those who decide to buy crypto that their decision should be based on fundamentals and solid research, and not on who promotes them. Hopefully, this SEC ruling does help younger investors to take investments decisions more seriously."

Pang said: 'The recommendation is simple and straightforward. If you are investing, remember that over 75 percent of people that do, lose money because they fail to educate themselves and to do the research.

"So, the best advice is to never invest more than you can afford to lose, but more importantly, never invest just because somebody tells you that you should.

"Always do your own research and make your own decisions based on facts, fundamentals, technical analysis and information that is verifiable."