Newsflash Cover image of Kim Kardashian
NewsFlashOctober 5, 2022

What Kim Kardashian’s SEC Fine Means For Influencer Marketing

October 5, 2022
Ashley Lightfoot Photo
Ashley Lightfoot
Content Marketing Manager

When brands partner with the right influencer they can effectively grow their profile by reaching new audiences and building trust. It’s no surprise then that by the end of 2022, the influencer industry is set to be worth $15 billion.

But the world of influencer marketing is still relatively young, and there are clear risks as well as rewards. While they represent a new way for consumers to interact and form new relationships with brands, they also have the potential to mislead or cause harm. It seems advertising-standards watchdogs are still drawing up the boundaries of what’s acceptable, while many brands are coming together to set their own standards — such as when Ogilvy decided not to work with influencers who alter their appearance in pictures.

The latest celebrity to be caught up in these developments is perhaps one of the most well-known and effective influencers around — Kim Kardashian. “Her intrinsic star quality” has lifted up a wealth of companies, from Beyond Meat to Balenciaga. But a 2021 promotion of cryptocurrency company Ethereum Max has landed the star in hot water and resulted in a $1.26 million fine.

The US Securities and Exchange Commission (SEC) fined Kardashian for failing to publicly disclose that she was being paid to promote the crypto firm in a post on her Instagram story. Though eagle-eyed followers of her account may have spotted a clue in the form of a hashtag, reading #ad, that was displayed at the bottom of the screen, the SEC “found that insufficient”.

The reality TV star was reportedly paid $250,000 through an intermediary for the ad, which read “Are you guys into crypto???? This is not financial advice but sharing what my friends just told me about the Ethereum Max token!”

She isn’t the first celebrity recruited to endorse cryptocurrencies. She’s joined by Matt Damon, Paul Pierce, Tom Brady, and Cristiano Ronaldo, to name a few — but her story represents what AdWeek called a “cautionary tale for what can go wrong when pumping up a financial brand’s image”, especially to those influencers who might not be able to absorb a fine as easily as billionaire Kim Kardashian can.

The story may also act as a cautionary tale for consumers, too — as the value of many of the cryptocurrencies advertised by celebrities in the last few years have typically tended to fall rather than rising after being pumped up by influencers. Indeed, EthereumMax, the cryptocurrency that Kardashian was promoting in 2021 has since “suffered a 98% wipeout in its value since the end of May 2021”, according to Bloomberg.

Influencers still have their reputations on the line when it comes to the products they promote but in the fast-moving, volatile world of crypto — and maybe even they are being taken a ride. It’s still yet to be seen how the SEC’s ruling will affect Kim’s reputation and the apparent trust that she commands with her 330.5 million followers. As part of her agreement with the SEC, she has agreed to “not promote crypto assets for three years.”

Currently, 48% of consumers think influencer marketing is more authentic than other marketing methods, but scandals like this one have the potential to damage the collective value and effectiveness of this marketing channel if it erodes consumer trust.

In September 2021, the head of the UK’s FCA (Financial Conduct Authority) “specifically called out Kardashian” in a speech, saying that the star’s post may have been the biggest financial promotion in history. However, he went on to caution that “social media influencers are routinely paid by scammers to help them pump and dump new tokens on the back of pure speculation. Some influencers promote coins that turn out simply not to exist at all.”

With the value of cryptocurrencies crashing between May and June 2022, causing many investors to lose huge sums of money, the brands within this industry face an increasingly difficult uphill struggle to rehabilitate their reputation with consumers. This latest news may only hurt them more, giving consumers a reason to doubt what is typically one of the most trusted forms of marketing.

Even if they’re able to bounce back from their current slump, if cryptocurrencies are ever to become the money of the future, they’ll need to fix their reputation and recover the trust of the average consumer — otherwise, they’re doomed to only be remembered as a folly of the past.

Main Image Credit: Kim Kardashian / Instagram.


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