Macauley Peterson

<div id="highlights-block_fabdfc498ea4cb089202c9fd8cd07ecd" class="highlights">
 <ul>
 <li>Kardashian was paid $250,000 to publish a post on her Instagram account about EMAX tokens, the SEC says</li>
 <li>The celebrity has agreed to a settlement for $1.26 million and to cooperate with the SEC&#8217;s investigation</li>
 </ul>
 
</div>



Celebrity influencer Kim Kardashian has agreed to a $1.26 million settlement with the SEC over her June 2021 endorsement of EthereumMax (EMAX).



Kardashian <a href="https://cms.blockworks.co/celebrities-are-getting-sued-over-their-affiliation-with-crypto-projects-heres-why/" target="_blank" rel="noreferrer noopener">hawked the previously unknown SafeMoon copycat</a> to her 225 million followers on Instagram without disclosing that she was being paid $250,000 for the promotion.



&#8220;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,&#8221; Gurbir Grewal, director of the SEC’s Division of Enforcement, said in a statement.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Today <a href="https://twitter.com/SECGov?ref_src=twsrc%5Etfw">@SECGov</a>, we charged Kim Kardashian for unlawfully touting a crypto security. This case is a reminder that, when celebrities / influencers endorse investment opps, including crypto asset securities, it doesn’t mean those investment products are right for all investors.&mdash; Gary Gensler (@GaryGensler) <a href="https://twitter.com/GaryGensler/status/1576897535427448832?ref_src=twsrc%5Etfw">October 3, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Financial services firm Morning Consult found that some 54 million US adults were aware of Kardashian’s post. Of those, roughly 10 million said they invested in EthereumMax, the <a href="https://morningconsult.com/2021/09/21/kim-kardashian-crypto-celebrity/" target="_blank" rel="noreferrer noopener">consultancy reported</a> in September 2021.



Within two weeks, the token’s price crashed 96%, prompting allegations that it was no more than a “pump and dump scheme.”



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
&#8220;Scam projects usually like more influencers with less sophisticated audience as followers are more likely to go and buy the token with zero research and questions,&#8221; Serhii Zhdanov, CEO of cryptocurrency exchange EXMO, told Blockworks by email.
</blockquote>



&#8220;If token allocates the same budget to the top influencers in finance/markets/economics category, it gets much worse results as the followers there are much more experienced,&#8221; he said.



A <a href="https://www.classaction.org/media/huegerich-v-gentile-et-al.pdf" target="_blank" rel="noreferrer noopener">class action lawsuit followed</a> alongside an SEC investigation, which is &#8220;ongoing,&#8221; and Kardashian is cooperating with the regulator, according to the statement.



Among the terms of <a href="https://www.sec.gov/litigation/admin/2022/33-11116.pdf" target="_blank" rel="noreferrer noopener">the settlement agreement</a>, Kardashian will be prohibited from promoting any “crypto asset security,” for a period of three years.



She is ordered to disgorge the $250,000 proceeds of her actions, plus interest, and pay a $1 million civil penalty to the SEC, which may, at its discretion, distribute the funds to investors or transfer them to the US Treasury.



Gabriel Shapiro, general counsel at Delphi Digital Labs, <a href="https://twitter.com/lex_node/status/1576899691135922176" target="_blank" rel="noreferrer noopener">said on Twitter</a> that the settlement represented a “stiff fine [and] an unusual direct rebuke from [SEC Chair] Gensler.” He noted that the original social media post by Kardashian was labelled as an advertisement, but she still ran afoul of securities laws because her compensation was undisclosed at the time.



The 41-year-old celebrity is <a href="https://www.celebritynetworth.com/richest-celebrities/models/kim-kardashian-net-worth/" target="_blank" rel="noreferrer noopener">estimated</a> to have a net worth of $1.4 billion, so the civil penalty is the equivalent of a $90 fine incurred by a median average US family.



This story was updated on Oct. 4, 2022, at 10:15 am ET.



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Kim Kardashian Gets Slap on the Wrist From SEC

Ornella Hernandez

<div id="highlights-block_62fe10b98bab9" class="highlights">
 <ul>
 <li>“Nine out of 10 celebrities, if they were to do an NFT release today, would fail,” said co-founder of ArtGrails, Avery Andon, brother of Graffiti artist Alec Monopoly</li>
 <li>Celebs should ask themselves if they’re getting paid to promote NFTs, marketing exec warns</li>
 </ul>
 
</div>



Moonpay, a crypto payments provider, runs a celebrity crypto concierge service to help the rich and famous acquire NFTs and other digital assets without getting their hands dirty.



But when public figures endorse crypto projects with tokens whose prices pump and tank, it not only seems shady, it’s potentially illegal.



MoonPay’s client roster includes Hilton, actress <a href="https://twitter.com/GwynethPaltrow/status/1486482496883625984?s=20&amp;t=UvZMjFLBQkPe_ZeztYveNw" target="_blank" rel="noreferrer noopener">Gwyneth Paltrow</a>, artist <a href="https://www.moonpay.com/blog/post-malone" target="_blank" rel="noreferrer noopener">Post Malone</a>, Madonna and others. Essentially, the company is working with the idea that NFTs are the “future of consumer engagement,” said Moonpay spokesperson Justin Hamilton.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“For major holders of intellectual property — celebrities, musicians, entertainers and athletes — the way that they are going to use this technology will be disconnected from market trading realities,” he said.</blockquote>



That may be true in theory, but there’s a reason crypto companies and projects seek to tie their brands to familiar and popular faces.



As bitcoin was retreating from dizzying record highs last December, Actor Matt Damon <a href="https://cms.blockworks.co/crypto-com-cmo-on-how-company-went-from-app-to-global-brand/" target="_blank" rel="noreferrer noopener">appeared</a> in a buzzy Crypto.com advertisement during the Super Bowl and said, “fortune favors the brave.”



A few months earlier, with the crypto bull market in full swing, film star Reese Witherspoon in a now-deleted <a href="https://web.archive.org/web/20210903001403/https://twitter.com/reesew/status/1433524984723349507" target="_blank" rel="noreferrer noopener">post</a> tweeted: &#8220;Just bought my first ETH! Let’s do this<a href="https://web.archive.org/web/20210903012125/https://twitter.com/hashtag/cryptotwitter?src=hash" target="_blank" rel="noreferrer noopener"> #cryptotwitter</a>.&#8221; ETH was worth almost $3,900 at the time and now trades for half that. Witherspoon also touted a World of Women NFT.



Earlier still, NFL legend Tom Brady founded his own NFT (non-fungible token) marketplace, Autograph. And like Damon, Brady also marketed a crypto exchange, FTX, alongside his wife, model Giselle Bündchen.&nbsp;



Heiress Paris Hilton then <a href="https://www.youtube.com/watch?v=5zi12wrh5So" target="_blank" rel="noreferrer noopener">dubbed</a> herself “The Queen of the Metaverse” in January after hosting DJ events in Roblox, bagging blue chip NFTs such as Bored Ape Yacht Club, and even creating her own.



The same thing happened during the mania of the last cycle, when Katy Perry <a href="https://www.instagram.com/p/BeXchJzFkhJ/" target="_blank" rel="noreferrer noopener">debuted</a> her “crypto claws” on Instagram — nails emblazoned with digital asset logos including bitcoin, ether and litecoin.



Despite the unfortunate timing of these endorsements, and whether the celebrities truly believe in — or even understand — crypto, their clout helped lend mainstream legitimacy to the industry.



“They know that they&#8217;re constantly going to have to push the envelope to invent new ways to create community, to create buy-in, to create loyalty,” said Hamilton. “Many of them think that NFT technologies will be the way to do that.”&nbsp;



<h3 class="wp-block-heading">Effects of the bear market&nbsp;</h3>



Despite the market downturn, rapper Snoop Dogg <a href="https://www.cnbc.com/2022/06/28/snoop-dogg-on-crypto-winter-and-the-future-of-nfts.html" target="_blank" rel="noreferrer noopener">told</a> CNBC that the crypto winter &#8220;weeded out all the people who weren&#8217;t supposed to be in the space and who were abusing the opportunities that were there,&#8221; during the NFT.NYC conference in June.



MoonPay <a href="https://cms.blockworks.co/moonpay-primes-nft-minting-service-hypermint/" target="_blank" rel="noreferrer noopener">launched</a> HyperMint during the same event, an NFT distribution platform that’s already worked with Universal Pictures and street artist Alec Monopoly.



Monopoly — born Alec Andon — and his brother and manager, Avery Andon, are planning their own concierge-like platform for high-profiles and celebrities who want to foster NFT communities. When asked what he thinks about celebrities jumping in during crypto winter, Andon said:



“There was that moment in the beginning when a couple of celebrities got lucky and made big bucks off of cash grab releases. But I genuinely think those days are done,” he said, pointing to singer Chris Brown’s recent attempt.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Nine out of 10 celebrities, if they were to do an NFT release today, would fail,” Andon said.</blockquote>



Brown released the Breezyverse collection of 3D animated Brown avatars at the start of July. Only 350 people have bought into the set of 10,000, as seen on OpenSea at the time of publication. Less than 13 ETH ($23,600) has been spent in total.



Web3 enthusiasts “really expect you to be an active member of their community and to really give a part of yourself for the project,” for example through weekly AMA chats or Instagram live chats, according to Andon.



“I think that it&#8217;s just such an in depth, exhaustive [process] that a real, true NFT project requires that most celebrities are not willing to make that commitment,” he added.



<h3 class="wp-block-heading">Marketing crypto tastefully is still possible</h3>



Geoff Renaud, chief marketing officer of the marketing agency Invisible North, echoed that sentiment.&nbsp;



“You see a lot of love and support from the Web3 community when people come for the right reasons, and the claws come out when endorsements are insincere, [Damon’s] Crypto.com ad being probably the most famous example,” Renaud said.



Still, he pointed to FTX’s “great job partnering with talent in creative and authentic ways. FTX “brilliantly cast” Curb Your Enthusiasm star Larry David in its own Super Bowl commercial.



FTX leveraged David’s trademark indifference to undersell crypto, unlike Crypto.com’s bullish narrative, and practically the opposite of Kim Karashian’s basic Instagram <a href="https://slate.com/technology/2021/10/ben-mckenzie-crypto-celebrities-kardashian-brady-lohan.html" target="_blank" rel="noreferrer noopener">advertisement</a> for SafeMoon rip-off EthereumMAX, which is now almost worthless.



“[FTX] made their athlete partners like Tom Brady and Steph Curry stakeholders in the company. The partnerships are always ‘on,’ and the athletes seem personally engaged, which is really rare,” Renaud said.&nbsp;



<h3 class="wp-block-heading">Celebs must ask themselves if they’re getting paid to promote NFTs</h3>



In any case, Renaud advised public figures to stay cautious about what they&#8217;re promoting. Referencing the ICO (initial coin offering) “craze” of 2017 and 2018, Renaud noted there’s still ongoing litigation over “empty celebrity promotions” from that era.



Most recently, the law firm Scott+Scott claimed that Bored Ape Yacht Club creators Yuga Labs used celebrity promoters and endorsements to inflate the price of its NFTs by overpromising high returns. Yuga Labs <a href="https://cms.blockworks.co/yuga-labs-faces-potential-class-action-lawsuit-over-inflated-bayc-nfts/" target="_blank" rel="noreferrer noopener">could face</a> a class action lawsuit.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“It&#8217;s a real shame that you can be dragged into a lawsuit just because you&#8217;re excited about a piece of digital art that you own,” Renaud said.</blockquote>



Kayvan Ghaffari, head of legal at NFT art marketplace MakersPlace, reasoned that it’s too soon to tell the exact regulatory implications, but public figures must ask themselves: “Am I receiving any sort of financial benefit from this NFT?”&nbsp;



“If the answer is yes, the FTC [Federal Trade Commission] will start to enforce the law,” Ghaffari said.&nbsp;&nbsp;



He added that federal agencies such as the US Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC) will emerge as primary NFT watchdogs.



19 celebrities have been warned by consumer watchdog group Truth in Advertising against shilling NFTs, Snoop Dogg, Paris Hilton, Tom Brady and many others <a href="https://truthinadvertising.org/industries/celebrities-promoting-nfts/" target="_blank" rel="noreferrer noopener">were called out</a> for “a failure to clearly and conspicuously disclose the promoter’s material connection to the endorsed NFT company.”



There has been no official involvement from the FTC, yet.



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Celebrities Shilled Crypto at the Top. Can They Learn for Next Cycle?

Morgan Chittum

<div id="highlights-block_61f2d60fbec96" class="highlights">
 <ul>
 <li>The lawsuits range from allegations of copyright infringement to misleading investors</li>
 <li>Kim Kardashian, Floyd Mayweather Jr. and Quentin Tarantino have been threatened with legal action over their affiliation with crypto projects</li>
 </ul>
 
</div>



Kim Kardashian, Floyd Mayweather Jr. and Quentin Tarantino may be best known for their roles in reality television, sports and award-winning films, but recently the three have joined a growing list of celebrities being sued for their affiliation with cryptocurrency-related projects. 



On June 14, Kardashian touted token EthereumMax for all of her 250 million followers to see.&nbsp;&nbsp;



“Are you guys into crypto???? This is not financial advice but sharing what my friends just told me about the EthereumMax token,” Kardashian wrote. “A few minutes ago EthereumMax burned 400 trillion tokens — literally 50% of its management portfolio going back to the entire E-Max community. Swipe up to join the e-max community.”



Boxer Mayweather also promoted the project in the runup to a televised fight with Youtuber Logan Paul, the same month for which some tickets were available for purchase with EthereumMax tokens.



After Mayweather announced that tickets could be <a href="https://www.prnewswire.com/news-releases/huge-milestone-for-practical-use-of-emax-301300421.html" target="_blank" rel="noreferrer noopener">purchased via EthereumMax</a> tokens on May 26 the price surged, peaking on May 29 at 420 times its pre-May 26 level, according to data from <a href="https://coinmarketcap.com/currencies/ethereummax/" target="_blank" rel="noreferrer noopener">Coinmarketcap</a>. The price fell sharply within days—a decline that continued after Kardashian’s tweet. 



By July 1, two weeks after Kardashian’s post, the token’s price had fallen approximately 96% from its peak.



Seven months after the post, a <a href="https://www.classaction.org/media/huegerich-v-gentile-et-al.pdf" target="_blank" rel="noreferrer noopener">class action complaint</a> was filed against Kardashian, Mayweather, two EthereumMax executives and another public promoter of the token, former <a href="https://twitter.com/paulpierce34/status/1397628485917577217?s=20&amp;t=taLRPy-ipbWyangd6HZjgA" target="_blank" rel="noreferrer noopener">NBA player Paul Pierce.</a> The suit alleges that EthereumMax executives inflated the price of the tokens before selling theirs for a large profit. 



New York resident Ryan Huegeruch, who lost money from investing in EthereumMax tokens, filed the claim on Jan. 7 in California federal court. Court filings alleged that the defendants advertised the project to raise the price of the token at “the expense of their followers and investors.&#8221;



“The [suit] alleges a classic pump-and-dump scheme, which claims an artificially inflated price of a stock by publicly touting false and misleading statements to the market and then insiders [later sell] the stock in order to make a profit,” Braden Perry, a former CFTC enforcement attorney, told Blockworks.&nbsp;



“The celebrities are paid for promotion, but typically do not know much about the underlying technology,” Perry said. “Nevertheless, such activity is considered market manipulation for all involved, including the celebrity promoters.”



The complaint alleged that the post from Kardashian had “tremendous reach.” According to a <a href="https://morningconsult.com/2021/09/21/kim-kardashian-crypto-celebrity/" target="_blank" rel="noreferrer noopener">survey</a> by financial services firm Morning Consult, 21% of all adults in the US had seen, read or heard about the post. Roughly a fifth of those who said they&#8217;d heard about the post invested in EthereumMax, the consultancy reported. 



Head of the UK’s Financial Conduct Authority Charles Randell <a href="https://www.fca.org.uk/news/speeches/risks-token-regulation" target="_blank" rel="noreferrer noopener">said</a> that Kardashian’s Instagram post may have been “the financial promotion with the single biggest audience reach in history.” 



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="979" height="710" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/kardashianTweet.png" alt="" class="wp-image-16168" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/kardashianTweet.png?w=979 979w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/kardashianTweet.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/kardashianTweet.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/kardashianTweet.png?w=354 354w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/kardashianTweet.png?w=360 360w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/kardashianTweet.png?w=302 302w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/kardashianTweet.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/kardashianTweet.png?w=50 50w" sizes="(max-width: 979px) 100vw, 979px" /></figure></div>



“The kinds of people that have been convinced by Kim Kardashian [to invest] probably shouldn&#8217;t be buying [crypto] anyway,” Stephen Young, founder of NFT marketplace NFTFi, told Blockworks.&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“I think [these lawsuits] are probably scaring some people away [from investing] but honestly, if that’s what made them decide to buy crypto they were going to lose their money anyway because they didn&#8217;t actually understand what they were doing.”</blockquote>



Director Quentin Tarantino is also facing an ongoing legal battle over his sale of NFTs based on his cult movie Pulp Fiction.&nbsp;



On Nov. 16, Miramax, the Hollywood studio that produced the 1994 movie, filed a lawsuit accusing Tarantino of committing trademark infringement, breaching his contract, copyright infringement and of unfair competition.&nbsp;



Miramax attorney Bart Williams accused Tarantino and his team of a “deliberate, premeditated, short-term money grab,” describing their actions as “profoundly disappointing,” according to a <a href="https://embed.documentcloud.org/documents/21111461-miramax-tarantino-nft/?embed=1&amp;responsive=1&amp;title=1" target="_blank" rel="noreferrer noopener">court filing</a>. 



However, the 58-year-old filmmaker has pushed forward with his <a href="https://cms.blockworks.co/quentin-tarantino-pushes-forward-with-pulp-fiction-nft-plans-despite-lawsuit-from-miramax/" target="_blank" rel="noreferrer noopener">non-fungible tokens plan </a>despite threats of legal action. The first of seven digital collectibles from the collection, which promise personalized audio commentary from the director himself, sold for $1.1 million at auction. 



“Celebrities are an easy target for [lawsuits] as typically they have deeper pockets than the company or company insiders,” Perry, the former CFTC enforcement attorney, said. “And with celebrities, it’s a very public battle, and underlying facts will dictate who’s right and who’s wrong. And whoever’s wrong may be looking at significant penalties from civil litigation and regulatory scrutiny.”



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Kim kardashian