Many companies featured on Money advertise with us. Opinions are our own, but compensation and
in-depth research determine where and how companies may appear. Learn more about how we make money.

Published: Oct 03, 2022 4 min read

Money is not a client of any investment adviser featured on this page. The information provided on this page is for educational purposes only and is not intended as investment advice. Money does not offer advisory services.

Photo Of Kim Kardashian On Instagram On A Phone In Front Of An Ethereum Coin Filled Background
Money; Shutterstock

Let Kim Kardashian’s $1.26-million penalty for improper crypto promotion be a warning to think twice before you follow investment advice from celebrities, the U.S. Securities and Exchange Commission said Monday.

The agency announced charges against the mega-influencer related to a June 2021 Instagram ad she posted about a crypto asset security sold by EthereumMax, which describes itself as a decentralized finance project. The SEC alleged that Kardashian failed to properly disclose that it was a paid, sponsored post. (Kardashian agreed to pay the $1.26 million settlement without "admitting or denying the SEC’s findings," per a news release.)

“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," SEC Chair Gary Gensler said in the release.

And it's not just her. Stars are facing an increasing amount of scrutiny for their promotion of crypto products, especially as some Americans have lost money on those investments in the last 11 months. Bitcoin, for instance, is down more than 70% since its peak in November.

Ads by Money. We may be compensated if you click this ad.AdAds by Money disclaimer
Build a portfolio through a unique investing experience
Public.com lets you invest in stocks, ETFs, and crypto with any amount of money. Share insights in a community and access a wealth of educational content.
HawaiiAlaskaFloridaSouth CarolinaGeorgiaAlabamaNorth CarolinaTennesseeRIRhode IslandCTConnecticutMAMassachusettsMaineNHNew HampshireVTVermontNew YorkNJNew JerseyDEDelawareMDMarylandWest VirginiaOhioMichiganArizonaNevadaUtahColoradoNew MexicoSouth DakotaIowaIndianaIllinoisMinnesotaWisconsinMissouriLouisianaVirginiaDCWashington DCIdahoCaliforniaNorth DakotaWashingtonOregonMontanaWyomingNebraskaKansasOklahomaPennsylvaniaKentuckyMississippiArkansasTexas
Join Today
Offer valid for U.S. residents 18+ and subject to account approval. There may be other fees associated with trading. See Public.com/disclosures.

The investing lesson from the Kardashian case

For investors, the Kardashian case is an example of a celebrity touting a crypto product to her large, loyal audience without making it completely clear how she was getting paid to make the endorsement, the SEC said.

The government has cautioned against taking investment advice from celebrities on numerous occasions in the past. Those warnings have gotten louder in recent years as advertising of crypto products, which are often highly volatile, has become ubiquitous.

Celebrities including actor Matt Damon, football player Tom Brady, actress Gwyneth Paltrow and socialite Paris Hilton have all taken heat for pushing crypto products in ads that later plunged in price.

In a CNBC interview, Gensler said influencers are required to disclose several elements of their advertising agreements when they promote securities. He thanked Kardashian for agreeing to cooperate with the investigation, adding that influencers need to follow the rules when they make these types of crypto deals.

Simply including the #ad hashtag is not enough when it comes to promoting investments on social media, he argued.

Ads by Money. We may be compensated if you click this ad.AdAds by Money disclaimer
Want to grow as an investor, no matter your level?
Public.com is the investing platform that helps people become better investors. Build your portfolio alongside over a million other community members.
Download Now
Offer valid for U.S. residents 18+ and subject to account approval. There may be other fees associated with trading. See Public.com/disclosures.

“This is a highly speculative asset class, and so when a celebrity or influencer is touting it, it's important that the public understands that relationship, and are they getting paid? And how much they're getting paid on their Instagram site? That's what this was about,” Gensler told CNBC.

Celebrity promotion of investments can be unlawful if paid advertising is not coupled with disclosure of “the nature, source, and amount of any compensation paid, directly or indirectly, by the company in exchange for the endorsement,” according to the SEC.

Experts and officials recommend doing independent research before making investments rather than taking the word of your favorite celebrity who may be getting compensated to tell you where to put your money. Crypto is a highly risky asset compared to stocks and bonds; many financial advisors tend to recommend an allocation of no more than 2-5% — if you’re going to invest in crypto at all.

More from Money:

Crypto Crackdown: Here’s What’s in Biden’s Plan for Regulations

More Than 70% of Crypto Investors Think They Can Become Billionaires

Stocks and Crypto Prices Are Following the Same Patterns. What Does That Mean for Investors?