SEC Chair Gary Gensler has warned investors about celebrities promoting crypto projects following the latest enforcement action. He advised investors to "know why celebrities are making those endorsements" in light of recent promotions by Kim Kardashian and Paul Pierce for EthereumMax (EMAX) tokens.
SEC Settles with Paul Pierce for $1.4 Million
The Securities and Exchange Commission (SEC) has reached a $1.4 million settlement with former NBA player Paul Pierce for allegedly promoting the EMAX token project on social media. The SEC claimed that Pierce failed to disclose the payment he received for the promotion and made false and misleading statements about the project.
Kim Kardashian Fined $1.2 Million for Similar Promotions
In October 2022, the SEC also fined Kim Kardashian $1.2 million for similar charges, as she failed to disclose a $250,000 payment for promoting EMAX tokens on her Instagram.
SEC Reminds Celebrities of Disclosure Requirements
SEC Chair Gary Gensler emphasized that "the law requires you to disclose to the public from whom and how much you are getting paid to promote investment in securities, and you can't lie to investors when you tout a security." As part of the settlement, Pierce agreed not to promote any crypto projects considered securities for three years and paid a $1.115 million penalty to the SEC and roughly $240,000 in disgorgement.
Investors Entitled to Know Promotor's Bias: SEC Enforcement Director
SEC Enforcement Director Gurbir Grewal emphasized that "investors are entitled to know whether a promoter of a security is unbiased, and Mr. Pierce failed to disclose this information."
SEC's "Regulation by Enforcement" Approach to Crypto Projects
The enforcement action by the SEC is part of its ongoing "regulation by enforcement" approach to crypto projects considered securities. On Feb. 9, the financial regulator reached a settlement with Kraken, in which the crypto exchange agreed to stop offering staking services or programs to U.S. clients.