Kim Kardashian Is Under Investigation for Promoting Cryptocurrency on Instagram

This week, reality star Kim Kardashian found herself embroiled in yet another scandal – but this time, it has nothing to do with her sisters, Kanye West, or a diamond earring lost in the water.

This time, the drama is being fuelled by cryptocurrency.

Kardashian was singled out by the head of the Financial Conduct Authority in a speech Monday. The Financial Conduct Authority is a regulator that monitors over 51,000 enterprises in the United Kingdom. Charles Randell, a socialite-turned-billionaire, used his platform at the Cambridge International Symposium on Economic Crime to advocate for tighter regulation of crypto tokens and social media marketing supporting cryptocurrency.

Randell took issue with an Instagram story Kardashian shared in June promoting the yield-based cryptocurrency Ethereum Max.

“When she was recently compensated to encourage her 250 million Instagram followers to speculate on crypto tokens by 'joining the Ethereum Max Community,' it may have been the single largest financial promotion in history,” Randell explained. “She admitted this was a #AD. However, she was not required to mention that Ethereum Max — not to be confused with Ethereum — was a speculative digital token developed a month earlier by unknown developers — one of hundreds of such tokens that populate cryptocurrency exchanges.”

Bitcoin, celebrities, and scams

While Randell stated he has no idea whether Ethereum Max is a scam, he took aim at influencers who are paid by scammers to "assist them in pumping and dumping new tokens based on sheer conjecture." Speculative trading is the act of purchasing and selling futures contracts based on an investor's forecast for the price of an asset (in this example, a digital coin). It is often regarded as a risky activity.

Randell contended that advertisements like Kardashian's do not adequately convey the risks associated with crypto currencies. While experienced investors who are active on the r/Bitcoin forum may be aware of the intricacies, those leisurely surfing Instagram on their lunch break may not.

Along with Kardashian, Ethereum Max has been supported by former NBA player Paul Pierce and boxer Floyd Mayweather.

“The excitement surrounding them instils a strong fear of missing out in certain consumers who may be unaware of the risks,” he added. “There is no lack of instances of people who have lost savings as a result of being enticed into the cryptobubble by delusory promises of rapid riches, sometimes as a result of listening to their favourite influencers, who are willing to betray their fans' confidence for a fee.”

Ethereum Max, for its part, told us that while "altcoins in general are risky," the company is devoted to openness.

“A large portion of our marketing and public relations efforts are focused on generating awareness and interest in our project. These efforts are always made with the intention of raising awareness, not of encouraging people to purchase — as the Kim K post was simply intended to raise awareness of the project and its utility,” it stated, adding that the goal is to “encourage people to research our project, speak with community members, get involved, and ask questions before making a decision.”

Speculative trading and crypto tokens are also unpopular on this side of the pond. In the United States, Securities and Exchange Commission Chairman Gary Gensler has dubbed cryptocurrency "the Wild West" due to widespread abuse and a scarcity of trustworthy information. Between October 2020 and May 2021, the Federal Trade Commission claimed that almost 7,000 Americans reported losing more than $80 million to crypto-related scams.

Gensler, like Randell, advocated for increased regulation in a May interview with CNBC.

“We need to update and refresh our laws to guarantee that, while retail investors and other individuals have First Amendment rights to free speech and association, they are not misrepresenting the public or manipulating the markets,” he added.

A prudent approach is to thoroughly research any investment before investing your money, to avoid schemes that "promise" you will become wealthy quickly, and to avoid financial advice from strangers online.

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