Kim Kardashian has agreed to pay $1.26 million to resolve claims made by the Securities and Exchange Commission that she violated US law by endorsing a cryptocurrency token without disclosing that she was being paid for the marketing.

According to the SEC, Kardashian received $250,000 in exchange for posting on her Instagram account promoting Ethereum Max's EMAX tokens, a cryptocurrency asset. In agreeing to the settlement, Kardashian did not confirm or refute the regulator's accusations.

The SEC has repeatedly emphasized that celebrities endorsing cryptocurrencies that it considers securities must disclose to investors if they are being compensated for the endorsement. To punish them for failing to disclose funds they received for promoting initial coin offerings, the regulator fined boxer Floyd Mayweather and music producer DJ Khaled in 2018.

Gurbir Grewal, director of the SEC's division of enforcement, stated in a prepared statement that "the federal securities laws are clear that any celebrity or other individual who promotes a crypto asset security must disclose the nature, source, and amount of compensation they received in exchange for the promotion."

Kardashian has consented to refrain from endorsing any cryptocurrency-related securities for three years.

"Ms. Kardashian is happy with how the situation with the SEC was settled. From the beginning, Kardashian fully cooperated with the SEC, and she is still ready to do anything she can to help the SEC with this situation. She wanted to put this issue behind her in order to avoid a drawn-out argument. As a result of the settlement she struck with the SEC, she is now free to pursue her numerous business endeavors "Kardashian's attorney stated in a statement.

What’s the Matter?

Kim Kardashian used Instagram to advertise a new cryptocurrency coin to her 250 million followers in June 2021. The coin was EthereumMax, and the post did feature the hashtag "#ad," but Kardashian didn't identify her apparent connections to the corporation in the form of a $250,000 payment for the post. Instead, she suggested that her friends had told her about the coin. Promoting something you believe in versus being compensated to promote an investment opportunity is a significant distinction.

Why was the EthereumMax Promotion an Issue?

Kim Kardashian and Floyd Mayweather were both included in a class-action lawsuit against EthereumMax earlier this year for an alleged "pump and dump" scheme. The lawsuit claims that EthereumMax inflated the price of this coin via celebrity endorsements before profitably selling its shares.

The main problem is that the cryptocurrency industry is unregulated; throughout the past few years, a lot of new projects have emerged that are either outright frauds or simply useless. Since the industry is unregulated, nearly anyone can create some sort of cryptocurrency enterprise without having to follow the formal registration requirements for conventional securities. The general public struggles to determine whether a celebrity truly supports a cause or if they have merely accepted money in exchange for their endorsement.