What you can learn from Kim Kardashian’s crypto settlement
You’d think that after 15 years in the spotlight, and passing the bar, Kim Kardashian could recite the rules of sponsored content in her sleep. But even social media queens make mistakes.
The Securities and Exchange Commission recently announced it was charging Kim for not disclosing a payment she received for promoting a cryptocurrency asset on her Instagram account in June of last year.
“Are you guys into crypto????” she asked her approximately 225 million followers at the time (she now has 332 million). “This is not financial advice but sharing what my friends just told me about the EthereumMax token!”
As one of the O.G. influencers, Kim is no stranger to #sponcon, and she included the usual #ad hashtag, among others. This time, though, that wasn’t enough. Because cryptocurrency is an investment, Kim also needed to disclose how much she was paid - in this case, $250,000.
Kim did not admit guilt but to settle the charges, she is paying $1.26 million, will cooperate with an ongoing investigation and has agreed not to promote crypto securities for three years.
“This case is a reminder that, when celebrities or influencers endorse investment opportunities, including crypto asset securities, it doesn’t mean that those investment products are right for all investors,” Gary Gensler, chairman of the SEC, said in a news release.
To sum it up, the government has had it with celebrities who are indirectly meddling in people’s finances for their own personal gain. Kim is far from the only offender, but she’s one of the most famous people to do it.
An earlier lawsuit came in January, when EthereumMax investors sued Kim, along with boxer Floyd Mayweather Jr., basketball player Paul Pierce and football player Antonio Brown. NBC News reports that that lawsuit is still in progress in the U.S. District Court for Central California.
That wasn’t the first time for Mayweather - he settled with the SEC back in 2018 for similar charges, along with rapper DJ Khaled. In this case and Kim’s, the SEC cited its 2017 report that said “digital tokens or coins offered and sold may be securities, and those who offer and sell securities in the United States must comply with the federal securities laws.”
(It’s giving serious “Per my last email” vibes…)
All of this doesn’t even touch on the other celebrities who are touting crypto platforms, which is not illegal but still controversial: Matt Damon, Larry David and Tom Brady have all participated.
Emily Parker explained in a column for CNN.com: “This is not normal. It’s much rarer to see high-profile celebrities doling out financial advice about more traditional assets like stocks. ‘If a celebrity promoted a random stock, would you buy it?’ Neeraj Agrawal, communications director at the cryptocurrency policy think tank Coin Center, told me. ‘Just because it’s crypto, you shouldn’t throw all due diligence out the window.’”
It’s easy to see why Kim was at the top of the SEC’s list. Besides being one of the most followed people in the world, she’s also made a lot of smart decisions, like building Skims into a $3 billion brand and using her influence to help get people off of death row. Not to mention her most recent announcement, the launch of a private equity firm. All of this makes it sound like she is really smart with her money.
But that’s not enough of a reason to bypass the professionals and follow Kim’s advice (afterall, that’s caused enough of an uproar).
“Cryptocurrency is a fast-moving industry, and regulators have yet to catch up,” CNN’s Parker points out. “New coins and projects are constantly popping up, sometimes without sufficient warnings about the risks of investing. One could argue that cryptocurrencies in general are largely sentiment-driven assets, in that their price is determined less by fundamentals and more by collective belief in their value. This can make social media a potentially powerful driver of prices. Several media reports have attributed movements in bitcoin’s and dogecoin’s price to specific [Elon] Musk tweets, for instance.”
(By the way, if you think Kim’s $1.26 million is a lot - read up on the $258 billion lawsuit against Elon.)
There are some folks who are somewhere in the middle of being a financial advisor and celebrity, whose word can be taken into consideration, like the professionals with organizations like CNBC or the Wall Street Journal. Jim Cramer, for example, has made an entire career out of recommending stocks to viewers. There’s an important point of distinction, though: to avoid a conflict of interest, Jim isn’t allowed to own individual stocks that could be discussed on his show.
While Jim’s been on the air for years, social media is quickly becoming a go-to platform to talk $$$, especially with the increased interest in crypto. That means more people are weighing in, from Wall Street employees to lifestyle influencers. There’s definitely a market for them: a survey found that 34% of Gen Z consumers obtain financial advice from TikTok and 33% from YouTube. Only 24% of this age group seek advice from professional financial advisors.
Whether you’re creating or consuming financial content online, you should be extremely careful. Here are a few tips to keep in mind:
Look out for the legal language: Whether reading or posting, an ethical post that is promoting financial advice will have acknowledged that in the copy. Keep that in mind when you’re deciding what’s legit. Here’s the FTC’s “Disclosures 101” guide for influencers.
Take the time to learn: Your money is important, so fact-checking what you read is a must. Money misinformation is prevalent online, and you should never rely on just one source. This report (compiled by Paxful, a platform to buy and sell Bitcoin) has more information on what to avoid from “influencer investors.”
Share and engage with content from reliable financial creators: There are people who are doing it right, and as we know all too well, engagement is good for business. Check out a few of our favorite creators, like Your Rich BFF, Mrs. Dow Jones and The Financial Diet.
TLDR; financial content can be life-changing when done well, but it’s probably too risky if you’re not an expert. If you’re considering this as one of your content buckets, think of some lower risk ideas, like money-saving hacks. And make sure you’re keeping up with financial news, because the government will likely be doing more to protect everyday investors.