A class-action lawsuit claims the cryptocurrency is a ‘pump and dump’ scheme that used celebrity endorsements to drive up prices.
Kim Kardashian has been fined $1.26m for promoting a cryptocurrency on Instagram without revealing she had been paid to do so.
The payment was to settle charges from the US Securities and Exchange Commission (SEC), which said Kardashian failed to disclose she was paid $250,000 to post about the EthereumMax cryptocurrency.
The post contained a link to the EthereumMax website, which provided instructions for potential investors to purchase tokens. Kardashian had around 225m Instagram followers at the time of the post.
The SEC said she has agreed to cooperate with its “ongoing investigation” and that the fine represented “penalties, disgorgement and interest”. She also agreed to not promote any crypto asset securities for three years.
SEC chair Gary Gensler said the case is a “reminder” that when celebrities or influencers endorse investment opportunities, it doesn’t mean they “are right for all investors”.
“We encourage investors to consider an investment’s potential risks and opportunities in light of their own financial goals,” Gensler said.
“Kardashian’s case also serves as a reminder to celebrities and others that the law requires them to disclose to the public when and how much they are paid to promote investing in securities.”
The SEC said Kardashian paid the fee “without admitting or denying the SEC’s findings”. In a statement to media outlets, her lawyer said that she wanted to “get this matter behind her to avoid a protracted dispute” and is pleased to have resolved the matter.
‘Pump and dump’ scheme
Kardashian was also targeted in a class-action lawsuit filed earlier this year, along with boxer Floyd Mayweather Jr and basketball player Paul Pierce, which claims EthereumMax is a “pump and dump” scheme.
The lawsuit alleges that it used “misleading promotions and celebrity endorsements” to increase the price of the cryptocurrency, before investors bought tokens at inflated prices.
EthereumMax has disputed the allegations and said it looked forward to the truth coming out, BBC reported.
The price of EthereumMax fell by 50pc one week after Kardashian promoted it on Instagram, according to MarketWatch.
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