If you run an online business, you know that you are required by the Federal Trade Commission (FTC) to disclose relationships that you will benefit from.
You’ll see such disclosures in almost every website terms and disclosures page, as well as on almost all blog posts that feature a service (not here, because I’m only promoting my own services and not someone else’s goods or services). You promote someone else’s stuff, you disclose that you could potentially benefit from that.
The Securities and Exchange Commission (SEC) has similar rules about disclosing paid relationships when you are promoting securities and investments.
Kardashian Promotes Crypto on Instagram
Kim Kardashian has 331 million followers on Instagram. She has proven to be able to launch products of her own and influence people to buy other products. And a pretty loyal following for those that like her.
That makes her really attractive to any company looking to get started or to increase their own sales. Attaching to a major celebrity is nothing new – including paying them to promote products.
So when EthereumMax wanted to push their EMAX tokens, they paid Kardashian $250,000 for an Instagram post on EMAX, including a link to their site and instructions on how to invest. This post went live on June 13, 2021.
Kardashian, though, failed to disclose that in her post that she was being paid to promote these crypto investments.
The SEC order found that Kardashian violated the anti-touting rules. Without admitting or denying liability, Kardashian agreed to pay $1.26 million to the SEC.
That includes the initial $250,000 payment from EthereumMAX, plus interest. And then another $1 million in penalties.
Affect on Kardashian’s Future
Sure, the settlement is likely a drop in the buck of the Kardashian fortune.
But an interesting side note is that Kardashian is attempting to become a licensed attorney in the State of California. As part of the licensing process, potential attorneys take the bar exam, but they also go through a character and fitness exam.
Basically, they look at a lot of things, including past criminal history. I had to disclose speeding tickets back in the day. Kardashian will definitely have to disclose this settlement as part of her efforts to become an attorney.
It doesn’t look good in your efforts to becoming an attorney when you are breaking the law like this.
Lessons for Online Business Owners and Influencers
This is a reminder to all online business owners and influencers that you must abide by the disclosure rules when you are promoting products.
Endorsements, whether online or IRL, should be honest and not misleading. If you are being paid, or have a monetary interest in the outcome (ie affiliate commissions), then you need to disclose this fact. It allows your reader to evaluate the trustfulness of your endorsement.
Now, you should never endorse something based solely on the monetary compensation you have or will receive. That does not build trust with your audience. But, regardless, the relationship should be disclosed.
I’m Not A Big Celebrity, They Won’t Come After Me
You may want to argue that you aren’t a big celebrity, able to change the market with your paid endorsement. That you are a little fish and the Feds don’t have time to come after you.
You are right – they are likely not going to come after small time bloggers. But maybe one day you will be a big time influencer, able to charge $250,000 for one Instagram post. Do you want them combing through your past posts for compliance issues?
Also, government officials may not come after you. But they may come after the programs that you are a part of. Like say Amazon.
That’s why those programs, and in particular Amazon, are so stringent in their FTC Disclosure rules. And the reason that they enforce those rules against you, the blogger.