Social Media Influencer Settles SEC Charges for Failing to Disclose Compensation in Crypto Offering Ad

Social media influencer Kimberly Kardashian settled SEC charges for unlawfully advertising a crypto-asset security on social media without disclosure of her compensation. The SEC stated that the tokens promoted by the individual were offered and sold as investment contracts and were thus considered securities.

According to the Order, the SEC found that Ms. Kardashian disclosed neither that she had been paid for the advertisement nor the amount of the consideration. Although she used a hashtag to indicate that it was an advertisement in the social media post, the SEC determined that she was still in violation of Securities Act Section 17(b) ("Fraudulent interstate transactions"), which prohibits the advertisement of a securities offering (even for ads that do not directly offer to sell the security) for paid consideration "without fully disclosing the receipt, whether past or prospective, of such consideration and the amount thereof." The SEC previously warned that some digital tokens or coins may be securities and must comply with federal securities laws.

To settle the charges, Ms. Kardashian agreed to (i) cease and desist, (ii) a three-year prohibition on accepting compensation for advertising a crypto-asset securities offering and (iii) a civil monetary penalty of $1 million with prejudgment interest of $10,415 and disgorgement of $250,000.