The US Securities and Exchange Commission (SEC) has announced this week that it is charging influencer Kim Kardashian in connection with her Instagram posts about cryptoassets
The SEC found that even though Kardashian used #ad on her posts, she failed to disclose that she was paid $250,000 to publish a post on her Instagram account about EMAX tokens, the crypto asset security being offered by EthereumMax. Kardashian’s post contained a link to the EthereumMax website, which provided instructions for potential investors to purchase EMAX tokens.
The SEC has found that Kardashian violated the anti-touting provision of the federal securities laws. Without admitting or denying the SEC’s findings, Kardashian has agreed to pay $1.26 million. Kardashian has also agreed to not promote any crypto asset securities for three years.
The case contrasts with the approach taken in the UK, where both the Advertising Standards Authority (ASA) and Financial Conduct Authority (FCA) have given influencers a slapped wrist, but no fines have been levied.
The ASA has issued guidance on crypto advertising more generally and in September 2022, it ruled in a case involving the influencer sisters Jessica and Eva Gale. It also considered a footballing crypto promotion in June when former Liverpool and England striker Michael Owen falsely claimed as part of a blockchain partnership that his NFT would never go down in value. However, it is unable to fine miscreants.
Back in September 2021, the FCA also warned that some social media influencers "are routinely paid by scammers to help them pump and dump new tokens on the back of pure speculation. Some influencers promote coins that turn out simply not to exist at all." It also said that the hype around them generates a powerful fear of missing out, or ‘FOMO’, from some consumers who may have little understanding of their risks. In short. FOMO is not a good investment strategy.
However, nothing much has happened since then, although there have been moves to include financial scams and fraudulent paid-for advertising, within the scope of the Online Safety Bill, requiring the largest and most popular social media platforms and search engines to prevent paid-for fraudulent adverts appearing on their services.
It begs the question whether the UK’s self-regulatory system is too lenient for this type of mischief? And do the regulators with fining powers, like the FCA, have the right tools and sufficient resources to tackle these issues? The FCA has said that even if it had the powers to do so, it could not take on the investigation and prosecution of all investment activity which is fraudulently promoted on the internet. Even if the Online Safety Bill is passed in some form, Ofcom has many competing priorities too.
So the question for UK regulators is this: When does a ‘light touch’ become a ‘soft touch’?
“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”