The U.S. Securities and Exchange Commission (SEC) is keeping up with the Kardashians. This time, however, for something less than desirable.
The reality TV star Kim Kardashian is facing charges of illegally promoting a type of cryptocurrency online. She reportedly did so via her official Instagram account. Celebrity endorsements are common and usually lawful. However, the star failed to disclose that she received $250,000 for promoting the investment opportunity offered by EthereumMax.
An endorsement may be unlawful if it does not disclose the nature, source, and amount of any compensation paid, directly or indirectly, by the company in exchange for the endorsement, per the SEC.
What does this mean for you?
- If you are an investor: When investing your money, do your own homework instead of relying on celebrity statements. They may not be reliable, and the opportunities advertised may not be right for you based on your personal financial situation. Remember that celebrities get paid to advertise the investment, just like they would a physical product.
- If you are an influencer: Beware of promoting securities without understanding the law. Celebrities and influencers often do not have much experience with federal securities laws. Still, the law requires you to disclose, among other things, the nature, scope and amount of compensation received for your promotion. In addition, be careful when accepting offers to advertise investments in general. Keep in mind that not all investment opportunities are appropriate for everyone in your audience.
Celebrity-backed investment endorsements are growing with the rising popularity of cryptocurrency. Thus, the SEC is keeping up with the evolving landscape, urging investors and influencers to become knowledgeable and stay up-to-date with the laws and requirements for such endorsements.