The SEC has launched its latest crypto asset-related charges – this time against a public figure currently launching her own latest product, albeit of a very different form: loungewear.

The SEC recently charged Kim Kardashian for “touting” on social media a crypto asset without disclosing that she received a payment of approximately $250,000 for that promotion, thereby violating Section 17(b) of the Securities Act of 1933.

Notably, the SEC used this case as another opportunity to declare a crypto asset (EMAX tokens) to be a “security” without taking action against EthereumMax, the issuer of the asset.

Kardashian’s post included a link to a website that provided instructions for potential investors to purchase EMAX tokens. The SEC settlement order contains a finding that the tokens were offered and sold as investment contracts, and therefore securities pursuant to Section 2(a)(1) of the Securities Act of 1933.  A footnote to the order indicates that its findings are not binding on any other person or entity in this or any other proceeding.  The SEC has not to date commenced a separate action against EthereumMax alleging it conducted an unregistered offering of securities or against any crypto exchanges that offered the tokens. 

Kardashian’s promotion occurred after the SEC warned in its July 25, 2017, DAO Report of Investigation that digital tokens may be securities, and that those who offer and sell securities in the U.S. must comply with the federal securities laws. The post also followed the SEC’s Division of Enforcement and Office of Compliance Inspections and Examinations statement that any celebrity or other individual who promotes a virtual token or coin that is a security must make certain disclosures.

Without admitting or denying the SEC’s findings, Kardashian agreed to pay $1.26 million, including approximately $260,000 in disgorgement representing her promotional payment. Kardashian also agreed to not promote any crypto asset securities for three years and to not commit or cause any future violations of Section 17(b). 

The SEC previously settled charges related to other celebrity endorsements, including with boxer Floyd Mayweather Jr., basketball player Paul Pierce, actor Steven Seagal and music producer DJ Khaled for failing to disclose compensation received for promotion of digital securities. 

This recent case serves as yet another reminder of the SEC’s eagle-eyed focus on crypto assets and investment activities and the need for all market participants to act with caution.