The name of one of the most popular figures in the world of global entertainment recently hit the pages of cryptocurrency news outlets, and business ones as well. That comes after Kim Kardashian agreed to pay a fine of 1.26 million USD for taking part in advertising a crypto project on her Instagram page. The project was EthereuMax and the US star got a payment of 250,000 USD to promote the same crypto token. At the same time, she failed to disclose that she was paid to do the very thing. The promotion, as well as the involvement of the US Securities and Exchange Commission, is a very powerful cautionary tale for any celebrity that is seeking to promote a digital currency project, no matter if this might be bitcoin or any other digital token.
However, the process also shows that the same underbelly of celebrity promotional potential is only growing in effectiveness and strength, both for the people at the top of that structure and those at the bottom who might see a massive loss of their funds. It is certain that the same process will not stop after the Kardashian ruling and agreement. However, there is at least the possibility that the biggest case in this domain for a long time will generate some public attention to the problem. That could in the long run save many individuals and families from huge potential losses in their funds that would otherwise be wasted on senseless or even downright fraudulent cryptocurrency projects and ventures.
Terms of the SEC Deal
Kim Kardashian, along with her legal team, entered the discussions with the SEC hoping to streamline the process and reach an agreement before it hits the courts. The same happened and appears that both parties are now satisfied with how the deal went through. The lawyer working for the celebrity said that Kim Kardashian agreed not to promote any crypto asset securities in the next 36 months. According to him, she is also pleased with how the whole thing got resolved with the regulatory agency.
Throughout this, she fully cooperated with the SEC from the start of the investigation and the settlement, as well as fact that she will remain in contact for any further discussions. The lawyer also said that Kim Kardashian wants, above anything else, to leave the matter behind her and avoid any potential protracted dispute. Now, with the deal in place, she can continue with a range of business pursuits that she has taken on at the present moment. These, however, will not include any cryptocurrency ventures, at least not in a direct promotional process for the next three years.
The crypto project that Kim Kardashian promoted, along with Paul Pierce from the NBA and the famous boxer Floyd Mayweather is EthereumMax. All of them were sued by the cryptocurrency’s investors at the start of 2022. The legal action states that these all collaborated to produce misleading promotions and with it sell the same cryptocurrency in a maneuver that is known as pump and dump. The same scheme is a well-known process in the investment community and not just in the domain of crypto, esports, and other digital ventures. With a pump and dump, a particular asset is inflated in price at the behest of a group of early investors.
That is the first phase of the process and the part known as the pump – during it, advertisements and celebrity endorsements are just part of the jigsaw puzzle that slowly builds up the price. Then, at a particular moment, the interest of the investment public peaks and the price jumps up rapidly. This signals the dump phase when the same digital currency or any other asset is then sold by those early investors, taking down its price in an even more drastic manner. However, at the time, EthereumMax disputed all of these allegations. Additionally, the venture has no connection to the main ethereum network in terms of its business dealings.
Creating a Cryptocurrency
The process of building a custom cryptocurrency has become insanely easy. A would-be creation needs just a small amount of money and the most basic blockchain tech knowledge that can be attained in a matter of days and with almost no previous experience in coding or program development. That is why there are thousands upon thousands of crypto projects active in the world. However, the intrinsic values of all of those projects are basically non-existent and what adds to them is marketing.
Through promotion, people might begin to buy them up and thus generate both their market cap and the growth of the price. In the case of EthereumMax, any possible value has been drowned down in the pressure from the misleading promotional effort, which is something that both the regulators in the US and the UK saw in the same light. For the most part, the same industry is still very much unregulated, but some projects, including this one, are snagged in the regulatory net. The same then resulted in a very hefty fine for Kim Kardashian.
Highly Speculative and Low Value
The SEC used this high-profile case to once more remind the US public, but everyone else as well, that cryptocurrency projects are highly speculative. Their value remains dubious at best and the fact that celebrities are actively endorsing some of these does not ultimately add to their true value. This includes genuine promotion from celebrities who might not be paid customers of the same venture, but investors as well who truly believe in its potential.
To make things worse, many of these celebrities, big and small, might be tied into crypto projects that are long-running plans for scams. While these are not a scam at the present moment, that status might flip at any moment, leaving the same public figures without money as much as any other regular investor. But, even with the recent round of negative publicity, the same project keeps getting celebrity backers as much as the willingness of a part of the public to invest in them.