- Kim Kardashian will pay a fine of $1.26 million for not revealing to her Instagram followers that she was compensated for promoting EthereumMax.
- This could be a sign that the Securities and Exchange Commission will introduce more regulations regarding the cryptocurrency space.
- The SEC released a video urging the public to think twice before taking investment advice from celebrities and influencers.
In somewhat surprising news, Kim Kardashian has been fined by the SEC for her alleged involvement in a crypto “pump and dump” scheme for not disclosing that she was getting paid for the advertisement. The news was unexpected because many celebrities and athletes have been eager to promote new coins hitting the market over the past few years.
Crypto celebrity endorsements have come from the likes of Matt Damon, Tom Brady, and Gwyneth Paltrow, to name a few. They have upgraded everything from cryptocurrency exchanges to NFT projects to the advent of risky new coins. Elon Musk regularly promoted Dogecoin all over social media as it became closely associated with the meme, although many skeptics quickly pointed out that the cryptocurrency started out as a parody.
The SEC released a video this morning, October 3, along with a press release informing the public that Kim Kardashian had been fined for not disclosing that she was receiving monetary compensation for promoting EthereumMax. They emphasized that we should all think carefully before purchasing investment opportunities from celebrities.
What happened with Kim Kardashian and the encryption system?
In June of 2021, Kim Kardashian turned to Instagram to promote a new digital currency to her nearly 250 million followers. The coin was EthereumMax, and the post used the hashtag “#ad,” but Kardashian explained that her friends had reported the coin to her instead of citing her alleged ties to the company in the form of a $250,000 payment for the post. There is a big difference between promoting something you believe in and paying to promote an investment opportunity.
The agency announced on the morning of October 3rd through a tweet by SEC President Gary Gensler and a press release that Kim Kardashian had accepted the fine. Kardashian has not commented on the organizer’s findings.
the official Securities and Exchange Commission press release He wrote the following about Kim Kardashian and EthereumMax:
Kardashian agreed to settle the charges, paying $1.26 million in fines, removals, and interest, and cooperating with the commission’s ongoing investigation.
The $1.26 million figure includes a $1 million fine along with $260,000, covering the $250,000 you paid for promotion and interest. It will also cooperate with the ongoing investigation while agreeing not to promote any crypto assets for three years. This story has gained a lot of media attention as it may lead to more problems for other celebrities who have promoted cryptocurrency in the past or want to promote it in the future. There will likely be more lawsuits and legal issues to come as the crypto space loses billions of dollars.
Why was this crypto promotion a problem?
One might wonder if the problem is the actual feature of the cryptocurrency. Earlier in the year, there was an announcement of a teamwork EthereumMax sued, where Kim Kardashian and Floyd Mayweather were included in an alleged “pump and dump” scheme. The lawsuit alleges that EthereumMax used celebrity endorsements to increase the value of this coin to inflate the price before selling their shares for a profit.
However, the lawsuit and investigation remain unresolved, while this fine resulted from the currency upgrade. Failure to disclose payments to promote the stock is a direct violation of the Federal Securities Act. The SEC believes that the public deserves to know whether investment promotion is unbiased. When a celebrity is compensated for promoting any type of investment, it is considered biased.
The main problem is that crypto is an unregulated space, so many new projects have popped up in the last few years and they are either complete scams or they don’t have any benefit. Since the space is unregulated, almost anyone can put together some kind of crypto project without having to go through the proper registration process for traditional securities. It is difficult for the public to know if a celebrity really believes in a project or if they simply accepted payment for profit.
What does this mean for cryptocurrencies?
This fine and the media attention it got will get a lot of people talking about cryptocurrency. The Securities and Exchange Commission (SEC) has taken a firm stand against celebrities and influencers who promote cryptocurrency projects to their audience without disclosing financial ties.
This could also be a sign of more regulation in the cryptocurrency space. We recently wrote about the Ethereum consolidation, which led to the SEC announcing that switching to a Proof of Stake (PoS) mechanism could mean that the blockchain would be considered security. If this happens, the entire Ethereum blockchain will have to be registered with the SEC. If Ethereum is classified as security, then every other cryptocurrency that uses the PoS system (such as Cardano and Solana) must also be registered with the SEC. These would be undesirable regulations for the decentralized crypto world.
We’ll keep you posted on what’s going on when it comes to cryptocurrency regulations. As mentioned earlier, the investigation into this situation with EthereumMax is far from over.
What should you know about investing in crypto?
We’ve all seen how volatile the stock market can be in 2022, as the market reacts to any news of rising interest rates or global disputes. The cryptocurrency market is more volatile than the stock market since it is open 24/7. The collapse of Luna earlier this year wiped out an estimated $60 billion from the cryptocurrency market.
We have to reiterate that investing in even the most popular cryptocurrencies is risky. For example, as of October 3, Ethereum is down 64.08%, while Bitcoin has already fallen by 57.54% for 2022. As you can imagine, you would drop a significant amount if you had invested in these coins around the beginning of the year. For what it’s worth, if you timed these popular crypto signals, you’ll see that they have a disastrous track record.
Since the cryptocurrency space is unregulated, it can be difficult to determine the legitimacy of the project. We encourage you to find out as much information as possible before investing in a coin that is relatively new or doesn’t contain a lot of data.
How can you invest in cryptocurrency?
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