What's the Kim Kardashian story and what does it tell us about the murky world of crypto security? We explain.

Businesswoman and reality TV star Kim Kardashian has been fined $1 million for her promotion of cryptocurrency on Instagram and not fully disclosing the fact that she was compensated to promote it. Kardashian is also required to repay the $250,000, plus interest, she was paid for putting out an article about EthereumMax tokens. Additionally, she is not allowed to advertise any crypto asset securities over the course of three years.

Why Kim Kardashian was fined

The platform has millions of users. Kardashian is a huge influencer on Instagram. At the time of writing her followers count was 331 million. When she published her crypto-related post in June of the year before she had 220 million people following her.

"Are you guys interested in cryptocurrency? ?" she had posted the question, as well as an URL to the EthereumMax website, which included instructions for investors on how to purchase EMAX tokens. The message also stated "Sharing what my friends just told me about the EthereumMax token!" It also included the hashtag "#ad" to indicate that it was a commercial.

However it was it was the US Securities and Exchange Commission (SEC) issued a fine for violating the law which obliges stars to inform their fans "the nature, source, and amount of compensation" they receive in order to help promote the investment in securities, a press release from the SEC on October 3 stated.

"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," said SEC Chair Gary Gensler. "We encourage investors to consider an investment's potential risks and opportunities in light of their own financial goals."

Kardashian accepted to settle the charge but without acknowledging or denial of the findings of the SEC. Her lawyer told BBC they were told that the reality television model "wanted to get this matter behind her to avoid a protracted dispute."

"The agreement she reached with the SEC allows her to do that so that she can move forward with her many different business pursuits," the lawyer said.

There are concerns about crypto-related crypto-related marketing

Since the cryptocurrency industry is not regulated or well-known, its promotion by celebrities can lead to the possibility of investors being entangled in scams they don't understand.

In the US The SEC states about endorsements by celebrities: "Persons making these endorsements may also be liable for potential violations of the anti-fraud provisions of the federal securities laws, for participating in an unregistered offer and sale of securities, and for acting as unregistered brokers."

Past cases

Kardashian, boxing legend Floyd Mayweather Jr., basketball player Paul Pierce, along with EthereumMax are also being accused of trespassing in the Los Angeles federal court for promotion of crypto tokens.

In the suit celebrity endorsements led to the currency's rise in value, reaching more than 1,300 percent higher than the initial value prior to it falling into "an all-time low" around one month following Kardashian's tweet according to an BBC report stated. The lawsuit was filed in January by an New York resident who bought the EMAX tokens but lost money.

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