WEBVTT - SEC Finds a Way to Keep Up With the Kardashians

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<v Speaker 1>This is Bloomberg Crypto Daily Bloomberg I heard podcast and

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<v Speaker 1>I'm an erea Bloomberg Senior Crypto editor in Today for

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<v Speaker 1>Stacy Marie Ishmael. It's Thursday, October thirteenth. Can we talk

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<v Speaker 1>Kim Kardashian. I gotta ask for your take on this

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<v Speaker 1>Kim Ka situation getting fined by the SEC. It's kind

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<v Speaker 1>of a big deal. It's one thing promoting makeup, promoting

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<v Speaker 1>fire Island tickets, but it's a very different thing promoting securities.

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<v Speaker 1>It seems that the Security is In Exchange Commission has

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<v Speaker 1>finally found a way to keep up with the Kardashians.

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<v Speaker 1>The regulator announced last week that Kim Kardashian had agreed

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<v Speaker 1>to pay one point two six million to settle allegations

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<v Speaker 1>that you broke US rules by touting a crypto token.

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<v Speaker 1>The SEC said that kurd Ashon did not disclose that

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<v Speaker 1>she was paid to post on her Instagram account about

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<v Speaker 1>EMACS token, a crypto asset offered by a theory in Max.

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<v Speaker 1>That allegation meant that Kim had an SEC speak illegally

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<v Speaker 1>touted a crypto security. What are the broader implications of

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<v Speaker 1>the SEC's action. What does it mean for their influencers

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<v Speaker 1>and celebrities hawking digital assets like n f T s

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<v Speaker 1>and is it a warning shot that stricter adherence to

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<v Speaker 1>the rules is on the way? Here to talk about

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<v Speaker 1>this is Mr Lena a Gulf of Polo and I'm

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<v Speaker 1>a personal finance reporter at Bloomberg and Alison vers Brill

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<v Speaker 1>and I'm the crypto regulation reporter at Bloomberg News. So

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<v Speaker 1>Kim Kardashian is definitely not the only celebrity that has

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<v Speaker 1>been involved with crypto, So why Kim? Why have they

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<v Speaker 1>gone after her? I think one of the things that

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<v Speaker 1>stood out to me when UM the SEC went after

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<v Speaker 1>Kim Kardashian specifically is that they really referenced that one

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<v Speaker 1>post that she posted on on her Instagram account um

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<v Speaker 1>on ethereum max. But if you look at the cryptoculture broadly,

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<v Speaker 1>there are people that are quote unquote shilling crypto tokens

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<v Speaker 1>way more than Kim Kardashian is, like on a daily

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<v Speaker 1>basis UM And I think that's not what you get

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<v Speaker 1>from Kim. And so I think what you're seeing here

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<v Speaker 1>is really regulators coming in and saying what I want

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<v Speaker 1>is high impact. Who is the person that is the

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<v Speaker 1>most famous person on the planet that I can go

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<v Speaker 1>after so that my message goes out loud and clear.

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<v Speaker 1>And what you also saw from Gary Ginsler UH last

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<v Speaker 1>week when he announced the the settlement charges against UH

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<v Speaker 1>Kim Kardashian is he also went on a mini press

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<v Speaker 1>tour promoting the fact that he had just UH settled

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<v Speaker 1>this with the largest celebrity on the planet. Sometimes pretty's

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<v Speaker 1>endorsed investment opportunities like crypto tokens or special purpose acquisition companies.

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<v Speaker 1>Celebrity endorsements, though, don't mean that an investment product is

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<v Speaker 1>right for you, or even frankly, that it's legitimate. He

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<v Speaker 1>also did a little YouTube video explaining what is and

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<v Speaker 1>isn't allowed to do. And so you really saw this

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<v Speaker 1>campaign from the SEC going after this as a cause

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<v Speaker 1>that they're hoping will reach the most amount of people.

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<v Speaker 1>But realistically, on a day to day basis, I mean,

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<v Speaker 1>this happens constantly and until that's also settled, until you

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<v Speaker 1>see the players in the crypto space who are constantly

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<v Speaker 1>shilling these these coins also get in line, I think

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<v Speaker 1>we're not necessarily seeing a massive impact from this decision.

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<v Speaker 1>I do think it's interesting. I was having a conversation

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<v Speaker 1>with someone who was like, well, you know, going after

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<v Speaker 1>Kim Kardashian probably makes it so that all of millennials

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<v Speaker 1>and and gen zs know that, you know, no who

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<v Speaker 1>the SEC is, right when probably a lot of people

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<v Speaker 1>might not have known the SEC or what they do.

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<v Speaker 1>So this case does give them kind of broad you know,

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<v Speaker 1>reach towards a lot of different sectors that they might

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<v Speaker 1>not have been uh, you know reaching before. And get

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<v Speaker 1>I get your point that you know there's there's a

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<v Speaker 1>broader mass of people also um chilling, Crypto, other influencers,

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<v Speaker 1>but I guess you know, I don't know that any

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<v Speaker 1>other has a reach quite as large as as Kim

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<v Speaker 1>production in terms of audience. Right, I think your Instagram

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<v Speaker 1>posts had already been been flagged by regulators in the

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<v Speaker 1>UK as have something of like historic proportion in terms

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<v Speaker 1>of the potential audience reach, right, because she has something

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<v Speaker 1>like three million Instagram followers. So you're also I guess

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<v Speaker 1>looking at how many people potentially could have gotten hurt, right, Like,

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<v Speaker 1>if you're going after some loan TikTok sixteen year old

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<v Speaker 1>doesn't have the same you know reach, Yeah, definitely. Um,

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<v Speaker 1>just one other thing I wanted to add again on

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<v Speaker 1>this point is on whether this is having a lot

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<v Speaker 1>of impact. Is one of the areas that the SEC

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<v Speaker 1>has yet to clarify as an area that is you know,

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<v Speaker 1>characterized as securities is n f t s and that

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<v Speaker 1>is where you see most celebrities play around with. I mean,

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<v Speaker 1>that is the crypto area where you see Justin Bieber, Madonna, Reese, Witherspoon,

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<v Speaker 1>Gwyneth Paltrow, all of these different celebrities really getting involved

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<v Speaker 1>over the past year. And when it comes to n

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<v Speaker 1>f t s, there really is a key legal question

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<v Speaker 1>on whether they're considered securities and therefore subject to the

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<v Speaker 1>same rules as stocks. Regulators have yet to disclose a

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<v Speaker 1>case in which they categorize n f t s as such,

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<v Speaker 1>and so that is where we're seeing the most sort

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<v Speaker 1>of you know, unclear and less certain situation when it

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<v Speaker 1>comes to celebrity endorsements in crypto. How are celebrities getting

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<v Speaker 1>involved in crypto or how have they gotten involved in

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<v Speaker 1>crypto so far? What we saw over the past year, especially,

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<v Speaker 1>you know, a year where the crypto market really took off,

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<v Speaker 1>is really all these different um crypto projects, be it

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<v Speaker 1>crypto coins or n f t s really trying to

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<v Speaker 1>capitalize the millions of followers that celebrity have to be

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<v Speaker 1>able to spread the message about their projects, and so

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<v Speaker 1>what you would see is a lot of celebrities jumping

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<v Speaker 1>in to specific projects, and by nature of how many

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<v Speaker 1>followers these celebrities would have, you would see the publicity

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<v Speaker 1>for those projects, and sometimes even the price of those

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<v Speaker 1>projects just you know, go up. And I think that

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<v Speaker 1>is the power of celebrity that we're seeing in crypto.

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<v Speaker 1>A lot of these really really famous people who have

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<v Speaker 1>a lot of influence over a lot of people promoting

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<v Speaker 1>these crypto projects and by simply doing that, urging a

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<v Speaker 1>lot of people who are their followers to jump into

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<v Speaker 1>those projects as well. Addie, is this the first time

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<v Speaker 1>that the SEC goes after US celebrity? No, it's definitely

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<v Speaker 1>not the It's not the first time in crypto that

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<v Speaker 1>the SEC has gone after celebrities. Back in two thousand eighteen, um,

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<v Speaker 1>we had you know, cases against DJ Khala, the music producer,

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<v Speaker 1>also Floyd Mayweather, the boxer, essentially for the same thing

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<v Speaker 1>that we're seeing Kim Kardashian getting slapped with the penalty

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<v Speaker 1>for here. Um, they were touting you know, projects initial

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<v Speaker 1>coin offerings and not disclosing that they had been paid

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<v Speaker 1>for the promotion. The SEC has warned celebrities before that

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<v Speaker 1>this activity is not okay, and I think that's a

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<v Speaker 1>big reason here why we see this penalty being much

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<v Speaker 1>higher than what we've seen in the past. You know,

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<v Speaker 1>nearly one point three million dollars, where prior cases we

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<v Speaker 1>were looking more like the hundreds of thousands of dollars.

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<v Speaker 1>Why is the penalty much higher? What have you heard?

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<v Speaker 1>Like are they trying to send a signal? So you know,

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<v Speaker 1>I talked to some folks who used to work at

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<v Speaker 1>the SEC, and they basically have said, you know, this

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<v Speaker 1>penalty shows that the agency is getting more serious about

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<v Speaker 1>these types of cases. Um. You know, the SEC has,

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<v Speaker 1>it feels, been pretty clear in the past of what

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<v Speaker 1>you can and cannot do that you have to you know,

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<v Speaker 1>disclose that you're being paid for these types of promotions. UM.

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<v Speaker 1>So this is really a shot across about that. You know,

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<v Speaker 1>the SEC hasn't forgotten about these cases. Um. If anything,

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<v Speaker 1>the dollar amounts are going to be higher. So folks

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<v Speaker 1>are now sort of unnoticed that that's what's going to happen.

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<v Speaker 1>So our celebrities were right now, I think some of

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<v Speaker 1>them are calling their lawyers and saying, hey, UM, what's

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<v Speaker 1>going on here? Should I be worried? I mean probably

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<v Speaker 1>the scrutiny over what they're doing has been around for

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<v Speaker 1>the past year. Um, Justin Bieber has done some pretty

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<v Speaker 1>sketchy things, so has Madonna. But again, there was really

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<v Speaker 1>no regulatory framework around whether what they were doing was

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<v Speaker 1>questionable or not. And that is what we're waiting for

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<v Speaker 1>the SEC to shine clarity on. And again, a lot

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<v Speaker 1>of these are n f T issues, and n f

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<v Speaker 1>T s remain really uncertain, and so I would imagine

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<v Speaker 1>that some celebrities did call the lawyers and ask them like, Hey,

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<v Speaker 1>is this something that impacts me? Or is this something

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<v Speaker 1>that I should keep in mind moving forward? Should I

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<v Speaker 1>tread more carefully? And I think that's the goal the

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<v Speaker 1>SEC try to accomplish here is really just shake uh

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<v Speaker 1>celebrities up a little and let them know, Hey, we're watching, Um,

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<v Speaker 1>will this actually impact the market? I mean, it's all

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<v Speaker 1>you know, tb D they do. You think the SEC

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<v Speaker 1>would say that there is no regulatory framework or that

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<v Speaker 1>it's been there the whole time. It's just people should

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<v Speaker 1>have called their lawyers before rather than now and said,

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<v Speaker 1>I want to promote this thing. Do you think it

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<v Speaker 1>would pass the Howie test or not. So the SEC

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<v Speaker 1>for for a long time has has sort of said,

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<v Speaker 1>it feels like the the how We test is clear.

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<v Speaker 1>Which is this older, you know, decades old test that

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<v Speaker 1>I think originally was on a and it was like

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<v Speaker 1>an orange orchard or something was at the center of it. Um.

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<v Speaker 1>And so the SEC has said, we think the rules

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<v Speaker 1>are pretty clear. You guys just need to apply them

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<v Speaker 1>and deal come to the right conclusion. UM. They've also

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<v Speaker 1>kind of consistently said we have this open door policy

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<v Speaker 1>where you can come in and talk to us. UM.

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<v Speaker 1>But I think from the industry side of things, they

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<v Speaker 1>still feel like there are a lot of gaps and

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<v Speaker 1>in the current system. UM. They don't necessarily feel like

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<v Speaker 1>this secs called to, you know, we have an open

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<v Speaker 1>door policy is genuine. They feel that sometimes when they

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<v Speaker 1>go in to talk to the SEC that it's sort

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<v Speaker 1>of a phishing expedition for potential enforcement cases. You know,

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<v Speaker 1>also that they're not really getting all of that all

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<v Speaker 1>that much help or or maybe a workable solution to

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<v Speaker 1>actually coming in and registering so there's a lot of

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<v Speaker 1>tension in between the SEC thinking things are clear the

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<v Speaker 1>industry thinking they're not. I'll also add to kind of

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<v Speaker 1>the prior points we've been making, you know, with these

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<v Speaker 1>celebrity cases, I think there's probably been I I you know,

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<v Speaker 1>I wonder if there's a little more urgency now with

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<v Speaker 1>the market downturn, right, it's not necessarily harmless to folks

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<v Speaker 1>to have these celebrities going out there and touting things

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<v Speaker 1>and then everyone had these big losses um in the market.

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<v Speaker 1>So you know, investors are kind of getting hurt in

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<v Speaker 1>these situations. UM. So you know, you wonder if that

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<v Speaker 1>maybe was playing a role in the SEC saying, you know,

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<v Speaker 1>we need to go after a really big fish here.

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<v Speaker 1>You know. So, I think it'll be interesting to see

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<v Speaker 1>if we see more of these cases coming down the pike,

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<v Speaker 1>coming up more with m C and Ali on celebrities

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<v Speaker 1>in crypto. So what's the message here for investors? We've

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<v Speaker 1>sort of gone over with the messages for celebrities, but

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<v Speaker 1>you know what you think they're they're telling investors the messages,

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<v Speaker 1>you know, make sure you do your due diligence. You

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<v Speaker 1>just need to make sure that if you're seeing any

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<v Speaker 1>crypto asset project or n f T touted by your

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<v Speaker 1>favorite celebrity, it doesn't necessarily mean that you should jump

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<v Speaker 1>in without doing your own research um and making sure

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<v Speaker 1>that it doesn't have financial implications that might hurt you

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<v Speaker 1>down the line. What can we expect going forward? Do

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<v Speaker 1>you think we'll see more celebrity cases or will we

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<v Speaker 1>or will see more influencer cases, or will they go

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<v Speaker 1>after the platforms that have all these influencers on them,

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<v Speaker 1>Will they go after the trading platforms that perhaps are

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<v Speaker 1>allowing trading and all these illegals what they consider to

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<v Speaker 1>be you know, unregistered securities. What are you hearing or

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<v Speaker 1>what do you expect based on what's going on? So

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<v Speaker 1>you know, look, I think ideally the SEC would love

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<v Speaker 1>to take down a big trading platform, because that's been

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<v Speaker 1>one of SEC chair Gary Ginsler's talking points has been

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<v Speaker 1>that these exchanges that are listing these tokens are listing securities,

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<v Speaker 1>These are unregistered securities. You need to come in, you

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<v Speaker 1>need to register with us. So I think the SEC

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<v Speaker 1>would probably love to have a big case against a big,

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<v Speaker 1>high profile trading platform. Those are also the most complicated

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<v Speaker 1>cases i've had talks with folks who have said, you know,

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<v Speaker 1>you could say, go after an exchange and say they're

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<v Speaker 1>listing X y Z tokens that are securities, and those

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<v Speaker 1>people could easily just take them off their platforms. Or

0:13:37.400 --> 0:13:40.959
<v Speaker 1>they also have you know, high profile attorneys who can

0:13:40.960 --> 0:13:43.720
<v Speaker 1>go in there and make pretty good arguments for why

0:13:43.840 --> 0:13:47.240
<v Speaker 1>maybe something isn't a security but it's actually a commodity. Um.

0:13:47.400 --> 0:13:50.480
<v Speaker 1>So I think those kind of cases would be something

0:13:50.480 --> 0:13:52.480
<v Speaker 1>that the SEC would be interested in, But I think

0:13:52.520 --> 0:13:55.800
<v Speaker 1>they're they're difficult to get to and it's probably why

0:13:56.040 --> 0:14:00.240
<v Speaker 1>we haven't seen one yet. Do they continue you to

0:14:00.320 --> 0:14:02.840
<v Speaker 1>kind of take these bites at smaller platforms around the

0:14:02.920 --> 0:14:06.120
<v Speaker 1>edges to get what they want? You know that that

0:14:06.200 --> 0:14:08.440
<v Speaker 1>might be That might be what we continue to see

0:14:08.480 --> 0:14:10.520
<v Speaker 1>is kind of you know, force fit cases that do

0:14:10.640 --> 0:14:15.560
<v Speaker 1>set precedents, but are you after after smaller platforms. I'm

0:14:15.559 --> 0:14:18.439
<v Speaker 1>just curious if Gary Gansler is going to appear in

0:14:18.480 --> 0:14:22.680
<v Speaker 1>an episode of Keeping Up with the Kardashians. I was

0:14:22.720 --> 0:14:24.880
<v Speaker 1>wondering that actually, like because are they're going to have

0:14:24.880 --> 0:14:27.400
<v Speaker 1>a part, like, especially because not on Disney, So I

0:14:27.440 --> 0:14:31.080
<v Speaker 1>wonder how they're going to touch the SEC on registered

0:14:31.160 --> 0:14:36.560
<v Speaker 1>securities topic on Disney Plus. Yeah, I mean that would

0:14:36.600 --> 0:14:39.560
<v Speaker 1>be that would be the perfect example of like a

0:14:39.640 --> 0:14:43.160
<v Speaker 1>mesh of crypto and pop culture. That would just how

0:14:43.240 --> 0:14:47.440
<v Speaker 1>everyone say, Wow, what am I watching? You know, I

0:14:47.480 --> 0:14:50.720
<v Speaker 1>already told Ben I need to watch obviously for homework

0:14:51.000 --> 0:14:56.600
<v Speaker 1>or purposes purposes. Yeah, so, yeah, no, I'm very curious

0:14:56.600 --> 0:15:00.680
<v Speaker 1>at that if that happens as well. All right, Thank

0:15:00.720 --> 0:15:03.560
<v Speaker 1>you Alien Missy for joining us today. Thanks for having me.

0:15:03.960 --> 0:15:06.800
<v Speaker 1>Thank you guys for having us. You can find more

0:15:06.800 --> 0:15:09.640
<v Speaker 1>of their reporting on the Bloomberg terminal, on Bloomberg dot

0:15:09.720 --> 0:15:13.720
<v Speaker 1>com and on Twitter. Ali is at A L l

0:15:13.960 --> 0:15:18.040
<v Speaker 1>y v e R s p r I L l

0:15:18.120 --> 0:15:22.640
<v Speaker 1>E and Missy is at m I S y R

0:15:22.920 --> 0:15:29.040
<v Speaker 1>l E n A. On the next episode of Bloomberg Crypto,

0:15:29.440 --> 0:15:32.920
<v Speaker 1>It's been another busy week for digital assets. What can

0:15:32.960 --> 0:15:36.280
<v Speaker 1>we make of the latest regulatory actions? And now that

0:15:36.400 --> 0:15:39.240
<v Speaker 1>China has banned crypto? Is it really going as planned?

0:15:39.680 --> 0:15:42.080
<v Speaker 1>I'm an area and I'll be breaking down some of

0:15:42.120 --> 0:15:48.200
<v Speaker 1>the biggest stories this week. This is Bloomberg Crypto, a

0:15:48.280 --> 0:15:51.680
<v Speaker 1>daily podcast from Bloomberg and I Heart Radio. For more

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<v Speaker 1>shows from I heart Radio, visit the i heart Radio

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<v Speaker 1>us your comments, questions, or for questions for the show

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<v Speaker 1>to Crypto at Bloomberg dot net or find us on Twitter.

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<v Speaker 1>We're at Crypto. The supervising producer of Bloomberg Crypto is

0:16:09.840 --> 0:16:14.080
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<v Speaker 1>are Mohammed Farouk and Sharon Barriro. Associate producer is Moses

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<v Speaker 1>on Them Desta wonder At is our engineer. Original music

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<v Speaker 1>by Leo Sidrn. I'm Stacy Marie Schmaal. We'll be back

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<v Speaker 1>tomorrow