The U.S. Securities and Exchange Commission is cracking down on celebrity endorsements of cryptocurrencies, with reality TV star Kim Kardashian becoming the latest after she agreed to pay a $1.26 million fine for promoting a coin without disclosing she was paid to do so. Cheddar News speaks with Katrina Prokopy, Chief Legal Officer and Head of Regulatory Affairs at Coinsquare, who breaks down the settlement.

Why Kim Kardashian Is in Trouble for Promoting Cryptocurrency

okay, making a shift here, kim Kardashian is the latest celebrity in hot water with federal regulators because of crypto, the U. S. Securities and Exchange Commission. The SEc announced today, it filed charges against the reality tv star for promoting a Cryptocurrency on social media without disk Closing. What she was paid to do to promote that Crypto, the sec says Kardashian has agreed to pay $1.26 million dollars fine as part of a settlement and agreed not to promote crypto assets for three years. Here's what its chairman had to say about the situation. Take a look. Sometimes celebrities endorse 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. Okay. Besides Kardashian boxer Floyd, Mayweather and basketball player paul pierce, they're named in the suit filed in january concerning a theory of max and joining me now, Katrina copy, chief legal officer and head of regulatory affairs at coin square a Cryptocurrency trading platform. Thank you so much for joining us. What about Kardashians endorsement? Did the sec find problematic here? I think the main problem is, you know, celebrity endorsements of products and services are, you know, nothing new. Uh, celebrities, companies use celebrities to endorse their products all the time. Uh, and you know, we're all very used to that the problem that arises here is that these products that kim Kardashian was endorsing and promoting uh were likely to be securities under federal securities laws. And so it's not like she was promoting a car or a some other gadget or some other consumer good, uh, if it is a security, uh, then there's rules that need to be complied with under federal securities laws. And as chairman, Gensler pointed out, um, you know, those laws are designed to protect investors. And one of the laws around promotions is that the promoter needs to disclose the compensation, the nature and scope and the amount of the compensation received in exchange for the promotion. And, and that is the technical violation that resulted in these charges by the sec. And this isn't the first time that we've seen Kardashian and really other high profile influencers getting slapped with some sort of charge or speculation here, could this have been alleviated with some sort of disclosure on the post? Or do you think there, there had to be more done? I think she did say something on the post, like it was an ad or something, but it was, you know, right at the bottom and it was, it was inefficient or ineffective in solving the problem. Um, I think that you're in a very different ballgame when you're promoting financial assets, uh, securities that are highly, highly regulated area, um, under, under federal Security and federal laws. Um, so I don't think that it could be solved really with, with more disclosure, um, you know, for all the things that kim Kardashian is, uh, she's not a financial advisor. Um, I think, you know, the messaging is, is very clear that these people have a lot of sort of scope and and sway in in common culture in this day and age. But really you should be looking for investment advice from people that are licensed and registered to dispense that advice. Right. And are you expecting some of those other celebrities that we mentioned named in the suit to face similar fines? I mean they very well could I think there's two things to keep in mind. The sec. S charges for violations of securities securities laws and not complying with the anti touting provisions in this promotion is one piece and that's what we saw today. Uh This find that that came out. Um But the other piece of this matter and the controversy over Imax is the civil class action lawsuit that was filed against Kardashian and a couple of the others at Floyd Mayweather and and the basketball player. Um that lawsuit is in the courts and it's it's a civil suit. This is the S. E. C. S. Uh enforcement of their own jurisdiction. So they're two separate things whether the lawsuit is settled and how that unfolds. Um you know is one thing, this is another I think the other individuals that are named in that suit could similarly would look to to this finding by the sec and govern themselves accordingly. All right, Katrina Prokop chief Legal officer and head of regulatory affairs at Coin square. Thanks so much for breaking that down for us.