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Kim K is #Fined for Crypto Influencer Post
A run-down of the Kim K news, why, and what this means for marketers.
Brad Michelson
October 04, 2022
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Have you seen the latest news about Kim Kardashian?
No, it doesn’t have anything to do with Kanye.
No, it doesn’t have anything to do with her clothing brand.
No, it doesn’t have anything to do with her TV show.
She’s been charged by SEC for unlawfully promoting EthereumMax in an influencer partnership last year. In her settlement, she agreed to pay $1.26 million in penalties and will work with the SEC on its ongoing investigation.
This is the Instagram post that caught the eye of of regulators:
Gary Gensler took a bit of a victory lap, signaling that the SEC is keeping a close eye on influencers in the financial services space.
Today @SECGov, 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.
— Gary Gensler (@GaryGensler)
11:30 AM • Oct 3, 2022
As far as Kim K goes, she’s far from the first celebrity to see regulator wrath for breaking the rules while promoting crypto projects:
In 2018, Floyd Mayweather and DJ Khaled were fined by the SEC
In 2020, Steven Seagal agreed to pay more than $300,000 to the SEC and was also banned from promoting investments for three years
Across all of these cases, there is one point that the SEC wants to get across. Although Kim K’s post did include a #ad and leads with “this is not financial advice,” but according to the SEC, that's not enough. The filing says the following:
“Any celebrity or other individual who promotes a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion.”
You can see similar language cited in the other filing examples above.
Last year I wrote a run-down of the things you should do when planning an influencer marketing campaign for your brand, with the key elements being:
Pick the Right Partners
Be Deliberate in Your Planning
Track Everything
Incentives Win
In the context of this week’s news, I feel the need to re-emphasize the first two in the context of compliance. It’s amazing how often we as consumers see blatantly non-compliant ads and influencer partnerships in the financial product space.
It’s on marketers to cover all your bases, especially when it comes to compliance.
In 2019, as influencer marketing was emerging as a mainstream channel, the FTC made a lot of noise issuing rules for social media influencer ad disclosures.
"Many consumers rely upon influencer recommendations in making purchasing decisions, and they should know when a brand paid an influencer for an endorsement, because it affects the weight and credibility the consumers may give to that endorsement," said Michael Atleson, a staff attorney for the FTC's Bureau of Consumer Protection.
This introduced the widely understood “#ad” rule that we see across social media today.
But what triggered this new guidance campaign?
The FTC charged two social media influencers, for the first time ever, for promoting an online gambling website without disclosing their ownership in the site they were endorsing.
While that 2019 FTC guideline in particular does not hold the force of law, the SEC’s rules sure do, and they reflect a similar intent of providing transparency for the consumer.
As marketers, it’s our job to both promote and protect our brands. The latter requires a close partnership with our compliance teams. Remember, part of Kim K’s settlement with the SEC is to help them with the SEC on its ongoing investigation of EthereumMax. Compliance’s entire job is to protect the business, so if you’re a marketer at a financial services firm, having a good relationship with your counterparts on that team is imperative.
Listen to your compliance teams, folks.