SEC Finds a Way to Keep Up With the Kardashians

It seems that the Security is In Exchange Commission has finally found a way to keep up with the Kardashians. The regulator announced last week that Kim Kardashian had agreed to pay one point two six million to settle allegations that you broke US rules by touting a crypto token. The SEC said that kurd Ashon did not disclose that she was paid to post on her Instagram account about EMACS token, a crypto asset offered by a theory in Max. That allegation meant that Kim had an SEC speak illegally

touted a crypto security. What are the broader implications of the SEC's action. What does it mean for their influencers and celebrities hawking digital assets like n f T s and is it a warning shot that stricter adherence to the rules is on the way? Here to talk about this is Mr Lena a Gulf of Polo and I'm a personal finance reporter at Bloomberg and Alison vers Brill and I'm the crypto regulation reporter at Bloomberg News. So Kim Kardashian is definitely not the only celebrity that has

been involved with crypto, So why Kim? Why have they gone after her? I think one of the things that stood out to me when UM the SEC went after Kim Kardashian specifically is that they really referenced that one post that she posted on on her Instagram account um on ethereum max. But if you look at the cryptoculture broadly, there are people that are quote unquote shilling crypto tokens way more than Kim Kardashian is, like on a daily basis UM And I think that's not what you get

from Kim. And so I think what you're seeing here is really regulators coming in and saying what I want is high impact. Who is the person that is the most famous person on the planet that I can go after so that my message goes out loud and clear. And what you also saw from Gary Ginsler UH last week when he announced the the settlement charges against UH Kim Kardashian is he also went on a mini press tour promoting the fact that he had just UH settled

this with the largest celebrity on the planet. Sometimes pretty's endorsed investment opportunities like crypto tokens or special purpose acquisition companies. Celebrity endorsements, though, don't mean that an investment product is right for you, or even frankly, that it's legitimate. He also did a little YouTube video explaining what is and

isn't allowed to do. And so you really saw this campaign from the SEC going after this as a cause that they're hoping will reach the most amount of people. But realistically, on a day to day basis, I mean, this happens constantly and until that's also settled, until you see the players in the crypto space who are constantly shilling these these coins also get in line, I think we're not necessarily seeing a massive impact from this decision.

I do think it's interesting. I was having a conversation with someone who was like, well, you know, going after Kim Kardashian probably makes it so that all of millennials and and gen zs know that, you know, no who the SEC is, right when probably a lot of people might not have known the SEC or what they do. So this case does give them kind of broad you know, reach towards a lot of different sectors that they might

not have been uh, you know reaching before. And get I get your point that you know there's there's a broader mass of people also um chilling, Crypto, other influencers, but I guess you know, I don't know that any other has a reach quite as large as as Kim production in terms of audience. Right, I think your Instagram posts had already been been flagged by regulators in the UK as have something of like historic proportion in terms of the potential audience reach, right, because she has something

like three million Instagram followers. So you're also I guess looking at how many people potentially could have gotten hurt, right, Like, if you're going after some loan TikTok sixteen year old doesn't have the same you know reach, Yeah, definitely. Um, just one other thing I wanted to add again on this point is on whether this is having a lot of impact. Is one of the areas that the SEC has yet to clarify as an area that is you know, characterized as securities is n f t s and that

is where you see most celebrities play around with. I mean, that is the crypto area where you see Justin Bieber, Madonna, Reese, Witherspoon, Gwyneth Paltrow, all of these different celebrities really getting involved over the past year. And when it comes to n f t s, there really is a key legal question on whether they're considered securities and therefore subject to the

same rules as stocks. Regulators have yet to disclose a case in which they categorize n f t s as such, and so that is where we're seeing the most sort of you know, unclear and less certain situation when it comes to celebrity endorsements in crypto. How are celebrities getting involved in crypto or how have they gotten involved in

crypto so far? What we saw over the past year, especially, you know, a year where the crypto market really took off, is really all these different um crypto projects, be it crypto coins or n f t s really trying to capitalize the millions of followers that celebrity have to be able to spread the message about their projects, and so what you would see is a lot of celebrities jumping in to specific projects, and by nature of how many

followers these celebrities would have, you would see the publicity for those projects, and sometimes even the price of those projects just you know, go up. And I think that is the power of celebrity that we're seeing in crypto. A lot of these really really famous people who have a lot of influence over a lot of people promoting these crypto projects and by simply doing that, urging a lot of people who are their followers to jump into those projects as well. Addie, is this the first time

that the SEC goes after US celebrity? No, it's definitely not the It's not the first time in crypto that the SEC has gone after celebrities. Back in two thousand eighteen, um, we had you know, cases against DJ Khala, the music producer, also Floyd Mayweather, the boxer, essentially for the same thing that we're seeing Kim Kardashian getting slapped with the penalty for here. Um, they were touting you know, projects initial coin offerings and not disclosing that they had been paid

for the promotion. The SEC has warned celebrities before that this activity is not okay, and I think that's a big reason here why we see this penalty being much higher than what we've seen in the past. You know, nearly one point three million dollars, where prior cases we were looking more like the hundreds of thousands of dollars. Why is the penalty much higher? What have you heard?

Like are they trying to send a signal? So you know, I talked to some folks who used to work at the SEC, and they basically have said, you know, this penalty shows that the agency is getting more serious about these types of cases. Um. You know, the SEC has, it feels, been pretty clear in the past of what you can and cannot do that you have to you know, disclose that you're being paid for these types of promotions. UM. So this is really a shot across about that. You know,

the SEC hasn't forgotten about these cases. Um. If anything, the dollar amounts are going to be higher. So folks are now sort of unnoticed that that's what's going to happen. So our celebrities were right now, I think some of them are calling their lawyers and saying, hey, UM, what's going on here? Should I be worried? I mean probably the scrutiny over what they're doing has been around for the past year. Um, Justin Bieber has done some pretty

sketchy things, so has Madonna. But again, there was really no regulatory framework around whether what they were doing was questionable or not. And that is what we're waiting for the SEC to shine clarity on. And again, a lot of these are n f T issues, and n f T s remain really uncertain, and so I would imagine that some celebrities did call the lawyers and ask them like, Hey, is this something that impacts me? Or is this something that I should keep in mind moving forward? Should I

tread more carefully? And I think that's the goal the SEC try to accomplish here is really just shake uh celebrities up a little and let them know, Hey, we're watching, Um, will this actually impact the market? I mean, it's all you know, tb D they do. You think the SEC would say that there is no regulatory framework or that it's been there the whole time. It's just people should have called their lawyers before rather than now and said, I want to promote this thing. Do you think it

would pass the Howie test or not. So the SEC for for a long time has has sort of said, it feels like the the how We test is clear. Which is this older, you know, decades old test that I think originally was on a and it was like an orange orchard or something was at the center of it. Um. And so the SEC has said, we think the rules are pretty clear. You guys just need to apply them and deal come to the right conclusion. UM. They've also kind of consistently said we have this open door policy

where you can come in and talk to us. UM. But I think from the industry side of things, they still feel like there are a lot of gaps and in the current system. UM. They don't necessarily feel like this secs called to, you know, we have an open door policy is genuine. They feel that sometimes when they go in to talk to the SEC that it's sort

of a phishing expedition for potential enforcement cases. You know, also that they're not really getting all of that all that much help or or maybe a workable solution to actually coming in and registering so there's a lot of tension in between the SEC thinking things are clear the

industry thinking they're not. I'll also add to kind of the prior points we've been making, you know, with these celebrity cases, I think there's probably been I I you know, I wonder if there's a little more urgency now with the market downturn, right, it's not necessarily harmless to folks to have these celebrities going out there and touting things and then everyone had these big losses um in the market. So you know, investors are kind of getting hurt in

these situations. UM. So you know, you wonder if that maybe was playing a role in the SEC saying, you know, we need to go after a really big fish here. You know. So, I think it'll be interesting to see if we see more of these cases coming down the pike, coming up more with m C and Ali on celebrities in crypto. So what's the message here for investors? We've sort of gone over with the messages for celebrities, but you know what you think they're they're telling investors the messages,

you know, make sure you do your due diligence. You just need to make sure that if you're seeing any crypto asset project or n f T touted by your favorite celebrity, it doesn't necessarily mean that you should jump in without doing your own research um and making sure that it doesn't have financial implications that might hurt you

down the line. What can we expect going forward? Do you think we'll see more celebrity cases or will we or will see more influencer cases, or will they go after the platforms that have all these influencers on them, Will they go after the trading platforms that perhaps are allowing trading and all these illegals what they consider to be you know, unregistered securities. What are you hearing or

what do you expect based on what's going on? So you know, look, I think ideally the SEC would love to take down a big trading platform, because that's been one of SEC chair Gary Ginsler's talking points has been that these exchanges that are listing these tokens are listing securities, These are unregistered securities. You need to come in, you need to register with us. So I think the SEC would probably love to have a big case against a big,

high profile trading platform. Those are also the most complicated cases i've had talks with folks who have said, you know, you could say, go after an exchange and say they're listing X y Z tokens that are securities, and those people could easily just take them off their platforms. Or they also have you know, high profile attorneys who can go in there and make pretty good arguments for why

maybe something isn't a security but it's actually a commodity. Um. So I think those kind of cases would be something that the SEC would be interested in, But I think they're they're difficult to get to and it's probably why we haven't seen one yet. Do they continue you to kind of take these bites at smaller platforms around the edges to get what they want? You know that that might be That might be what we continue to see is kind of you know, force fit cases that do

set precedents, but are you after after smaller platforms. I'm just curious if Gary Gansler is going to appear in an episode of Keeping Up with the Kardashians. I was wondering that actually, like because are they're going to have a part, like, especially because not on Disney, So I wonder how they're going to touch the SEC on registered securities topic on Disney Plus. Yeah, I mean that would be that would be the perfect example of like a mesh of crypto and pop culture. That would just how

everyone say, Wow, what am I watching? You know, I already told Ben I need to watch obviously for homework or purposes purposes. Yeah, so, yeah, no, I'm very curious at that if that happens as well. All right, Thank you Alien Missy for joining us today. Thanks for having me. Thank you guys for having us. You can find more of their reporting on the Bloomberg terminal, on Bloomberg dot

com and on Twitter. Ali is at A L l y v e R s p r I L l E and Missy is at m I S y R l E n A. On the next episode of Bloomberg Crypto, It's been another busy week for digital assets. What can we make of the latest regulatory actions? And now that China has banned crypto? Is it really going as planned? I'm an area and I'll be breaking down some of the biggest stories this week. This is Bloomberg Crypto, a

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