Speaker 1: This is Bloomberg Crypto Daily Bloomberg I heard podcast and
Speaker 1: I'm an erea Bloomberg Senior Crypto editor in Today for
Speaker 1: Stacy Marie Ishmael. It's Thursday, October thirteenth. Can we talk
Speaker 1: Kim Kardashian. I gotta ask for your take on this
Speaker 1: Kim Ka situation getting fined by the SEC. It's kind
Speaker 1: of a big deal. It's one thing promoting makeup, promoting
Speaker 1: fire Island tickets, but it's a very different thing promoting securities.
Speaker 1: It seems that the Security is In Exchange Commission has
Speaker 1: finally found a way to keep up with the Kardashians.
Speaker 1: The regulator announced last week that Kim Kardashian had agreed
Speaker 1: to pay one point two six million to settle allegations
Speaker 1: that you broke US rules by touting a crypto token.
Speaker 1: The SEC said that kurd Ashon did not disclose that
Speaker 1: she was paid to post on her Instagram account about
Speaker 1: EMACS token, a crypto asset offered by a theory in Max.
Speaker 1: That allegation meant that Kim had an SEC speak illegally
Speaker 1: touted a crypto security. What are the broader implications of
Speaker 1: the SEC's action. What does it mean for their influencers
Speaker 1: and celebrities hawking digital assets like n f T s
Speaker 1: and is it a warning shot that stricter adherence to
Speaker 1: the rules is on the way? Here to talk about
Speaker 1: this is Mr Lena a Gulf of Polo and I'm
Speaker 1: a personal finance reporter at Bloomberg and Alison vers Brill
Speaker 1: and I'm the crypto regulation reporter at Bloomberg News. So
Speaker 1: Kim Kardashian is definitely not the only celebrity that has
Speaker 1: been involved with crypto, So why Kim? Why have they
Speaker 1: gone after her? I think one of the things that
Speaker 1: stood out to me when UM the SEC went after
Speaker 1: Kim Kardashian specifically is that they really referenced that one
Speaker 1: post that she posted on on her Instagram account um
Speaker 1: on ethereum max. But if you look at the cryptoculture broadly,
Speaker 1: there are people that are quote unquote shilling crypto tokens
Speaker 1: way more than Kim Kardashian is, like on a daily
Speaker 1: basis UM And I think that's not what you get
Speaker 1: from Kim. And so I think what you're seeing here
Speaker 1: is really regulators coming in and saying what I want
Speaker 1: is high impact. Who is the person that is the
Speaker 1: most famous person on the planet that I can go
Speaker 1: after so that my message goes out loud and clear.
Speaker 1: And what you also saw from Gary Ginsler UH last
Speaker 1: week when he announced the the settlement charges against UH
Speaker 1: Kim Kardashian is he also went on a mini press
Speaker 1: tour promoting the fact that he had just UH settled
Speaker 1: this with the largest celebrity on the planet. Sometimes pretty's
Speaker 1: endorsed investment opportunities like crypto tokens or special purpose acquisition companies.
Speaker 1: Celebrity endorsements, though, don't mean that an investment product is
Speaker 1: right for you, or even frankly, that it's legitimate. He
Speaker 1: also did a little YouTube video explaining what is and
Speaker 1: isn't allowed to do. And so you really saw this
Speaker 1: campaign from the SEC going after this as a cause
Speaker 1: that they're hoping will reach the most amount of people.
Speaker 1: But realistically, on a day to day basis, I mean,
Speaker 1: this happens constantly and until that's also settled, until you
Speaker 1: see the players in the crypto space who are constantly
Speaker 1: shilling these these coins also get in line, I think
Speaker 1: we're not necessarily seeing a massive impact from this decision.
Speaker 1: I do think it's interesting. I was having a conversation
Speaker 1: with someone who was like, well, you know, going after
Speaker 1: Kim Kardashian probably makes it so that all of millennials
Speaker 1: and and gen zs know that, you know, no who
Speaker 1: the SEC is, right when probably a lot of people
Speaker 1: might not have known the SEC or what they do.
Speaker 1: So this case does give them kind of broad you know,
Speaker 1: reach towards a lot of different sectors that they might
Speaker 1: not have been uh, you know reaching before. And get
Speaker 1: I get your point that you know there's there's a
Speaker 1: broader mass of people also um chilling, Crypto, other influencers,
Speaker 1: but I guess you know, I don't know that any
Speaker 1: other has a reach quite as large as as Kim
Speaker 1: production in terms of audience. Right, I think your Instagram
Speaker 1: posts had already been been flagged by regulators in the
Speaker 1: UK as have something of like historic proportion in terms
Speaker 1: of the potential audience reach, right, because she has something
Speaker 1: like three million Instagram followers. So you're also I guess
Speaker 1: looking at how many people potentially could have gotten hurt, right, Like,
Speaker 1: if you're going after some loan TikTok sixteen year old
Speaker 1: doesn't have the same you know reach, Yeah, definitely. Um,
Speaker 1: just one other thing I wanted to add again on
Speaker 1: this point is on whether this is having a lot
Speaker 1: of impact. Is one of the areas that the SEC
Speaker 1: has yet to clarify as an area that is you know,
Speaker 1: characterized as securities is n f t s and that
Speaker 1: is where you see most celebrities play around with. I mean,
Speaker 1: that is the crypto area where you see Justin Bieber, Madonna, Reese, Witherspoon,
Speaker 1: Gwyneth Paltrow, all of these different celebrities really getting involved
Speaker 1: over the past year. And when it comes to n
Speaker 1: f t s, there really is a key legal question
Speaker 1: on whether they're considered securities and therefore subject to the
Speaker 1: same rules as stocks. Regulators have yet to disclose a
Speaker 1: case in which they categorize n f t s as such,
Speaker 1: and so that is where we're seeing the most sort
Speaker 1: of you know, unclear and less certain situation when it
Speaker 1: comes to celebrity endorsements in crypto. How are celebrities getting
Speaker 1: involved in crypto or how have they gotten involved in
Speaker 1: crypto so far? What we saw over the past year, especially,
Speaker 1: you know, a year where the crypto market really took off,
Speaker 1: is really all these different um crypto projects, be it
Speaker 1: crypto coins or n f t s really trying to
Speaker 1: capitalize the millions of followers that celebrity have to be
Speaker 1: able to spread the message about their projects, and so
Speaker 1: what you would see is a lot of celebrities jumping
Speaker 1: in to specific projects, and by nature of how many
Speaker 1: followers these celebrities would have, you would see the publicity
Speaker 1: for those projects, and sometimes even the price of those
Speaker 1: projects just you know, go up. And I think that
Speaker 1: is the power of celebrity that we're seeing in crypto.
Speaker 1: A lot of these really really famous people who have
Speaker 1: a lot of influence over a lot of people promoting
Speaker 1: these crypto projects and by simply doing that, urging a
Speaker 1: lot of people who are their followers to jump into
Speaker 1: those projects as well. Addie, is this the first time
Speaker 1: that the SEC goes after US celebrity? No, it's definitely
Speaker 1: not the It's not the first time in crypto that
Speaker 1: the SEC has gone after celebrities. Back in two thousand eighteen, um,
Speaker 1: we had you know, cases against DJ Khala, the music producer,
Speaker 1: also Floyd Mayweather, the boxer, essentially for the same thing
Speaker 1: that we're seeing Kim Kardashian getting slapped with the penalty
Speaker 1: for here. Um, they were touting you know, projects initial
Speaker 1: coin offerings and not disclosing that they had been paid
Speaker 1: for the promotion. The SEC has warned celebrities before that
Speaker 1: this activity is not okay, and I think that's a
Speaker 1: big reason here why we see this penalty being much
Speaker 1: higher than what we've seen in the past. You know,
Speaker 1: nearly one point three million dollars, where prior cases we
Speaker 1: were looking more like the hundreds of thousands of dollars.
Speaker 1: Why is the penalty much higher? What have you heard?
Speaker 1: Like are they trying to send a signal? So you know,
Speaker 1: I talked to some folks who used to work at
Speaker 1: the SEC, and they basically have said, you know, this
Speaker 1: penalty shows that the agency is getting more serious about
Speaker 1: these types of cases. Um. You know, the SEC has,
Speaker 1: it feels, been pretty clear in the past of what
Speaker 1: you can and cannot do that you have to you know,
Speaker 1: disclose that you're being paid for these types of promotions. UM.
Speaker 1: So this is really a shot across about that. You know,
Speaker 1: the SEC hasn't forgotten about these cases. Um. If anything,
Speaker 1: the dollar amounts are going to be higher. So folks
Speaker 1: are now sort of unnoticed that that's what's going to happen.
Speaker 1: So our celebrities were right now, I think some of
Speaker 1: them are calling their lawyers and saying, hey, UM, what's
Speaker 1: going on here? Should I be worried? I mean probably
Speaker 1: the scrutiny over what they're doing has been around for
Speaker 1: the past year. Um, Justin Bieber has done some pretty
Speaker 1: sketchy things, so has Madonna. But again, there was really
Speaker 1: no regulatory framework around whether what they were doing was
Speaker 1: questionable or not. And that is what we're waiting for
Speaker 1: the SEC to shine clarity on. And again, a lot
Speaker 1: of these are n f T issues, and n f
Speaker 1: T s remain really uncertain, and so I would imagine
Speaker 1: that some celebrities did call the lawyers and ask them like, Hey,
Speaker 1: is this something that impacts me? Or is this something
Speaker 1: that I should keep in mind moving forward? Should I
Speaker 1: tread more carefully? And I think that's the goal the
Speaker 1: SEC try to accomplish here is really just shake uh
Speaker 1: celebrities up a little and let them know, Hey, we're watching, Um,
Speaker 1: will this actually impact the market? I mean, it's all
Speaker 1: you know, tb D they do. You think the SEC
Speaker 1: would say that there is no regulatory framework or that
Speaker 1: it's been there the whole time. It's just people should
Speaker 1: have called their lawyers before rather than now and said,
Speaker 1: I want to promote this thing. Do you think it
Speaker 1: would pass the Howie test or not. So the SEC
Speaker 1: for for a long time has has sort of said,
Speaker 1: it feels like the the how We test is clear.
Speaker 1: Which is this older, you know, decades old test that
Speaker 1: I think originally was on a and it was like
Speaker 1: an orange orchard or something was at the center of it. Um.
Speaker 1: And so the SEC has said, we think the rules
Speaker 1: are pretty clear. You guys just need to apply them
Speaker 1: and deal come to the right conclusion. UM. They've also
Speaker 1: kind of consistently said we have this open door policy
Speaker 1: where you can come in and talk to us. UM.
Speaker 1: But I think from the industry side of things, they
Speaker 1: still feel like there are a lot of gaps and
Speaker 1: in the current system. UM. They don't necessarily feel like
Speaker 1: this secs called to, you know, we have an open
Speaker 1: door policy is genuine. They feel that sometimes when they
Speaker 1: go in to talk to the SEC that it's sort
Speaker 1: of a phishing expedition for potential enforcement cases. You know,
Speaker 1: also that they're not really getting all of that all
Speaker 1: that much help or or maybe a workable solution to
Speaker 1: actually coming in and registering so there's a lot of
Speaker 1: tension in between the SEC thinking things are clear the
Speaker 1: industry thinking they're not. I'll also add to kind of
Speaker 1: the prior points we've been making, you know, with these
Speaker 1: celebrity cases, I think there's probably been I I you know,
Speaker 1: I wonder if there's a little more urgency now with
Speaker 1: the market downturn, right, it's not necessarily harmless to folks
Speaker 1: to have these celebrities going out there and touting things
Speaker 1: and then everyone had these big losses um in the market.
Speaker 1: So you know, investors are kind of getting hurt in
Speaker 1: these situations. UM. So you know, you wonder if that
Speaker 1: maybe was playing a role in the SEC saying, you know,
Speaker 1: we need to go after a really big fish here.
Speaker 1: You know. So, I think it'll be interesting to see
Speaker 1: if we see more of these cases coming down the pike,
Speaker 1: coming up more with m C and Ali on celebrities
Speaker 1: in crypto. So what's the message here for investors? We've
Speaker 1: sort of gone over with the messages for celebrities, but
Speaker 1: you know what you think they're they're telling investors the messages,
Speaker 1: you know, make sure you do your due diligence. You
Speaker 1: just need to make sure that if you're seeing any
Speaker 1: crypto asset project or n f T touted by your
Speaker 1: favorite celebrity, it doesn't necessarily mean that you should jump
Speaker 1: in without doing your own research um and making sure
Speaker 1: that it doesn't have financial implications that might hurt you
Speaker 1: down the line. What can we expect going forward? Do
Speaker 1: you think we'll see more celebrity cases or will we
Speaker 1: or will see more influencer cases, or will they go
Speaker 1: after the platforms that have all these influencers on them,
Speaker 1: Will they go after the trading platforms that perhaps are
Speaker 1: allowing trading and all these illegals what they consider to
Speaker 1: be you know, unregistered securities. What are you hearing or
Speaker 1: what do you expect based on what's going on? So
Speaker 1: you know, look, I think ideally the SEC would love
Speaker 1: to take down a big trading platform, because that's been
Speaker 1: one of SEC chair Gary Ginsler's talking points has been
Speaker 1: that these exchanges that are listing these tokens are listing securities,
Speaker 1: These are unregistered securities. You need to come in, you
Speaker 1: need to register with us. So I think the SEC
Speaker 1: would probably love to have a big case against a big,
Speaker 1: high profile trading platform. Those are also the most complicated
Speaker 1: cases i've had talks with folks who have said, you know,
Speaker 1: you could say, go after an exchange and say they're
Speaker 1: listing X y Z tokens that are securities, and those
Speaker 1: people could easily just take them off their platforms. Or
Speaker 1: they also have you know, high profile attorneys who can
Speaker 1: go in there and make pretty good arguments for why
Speaker 1: maybe something isn't a security but it's actually a commodity. Um.
Speaker 1: So I think those kind of cases would be something
Speaker 1: that the SEC would be interested in, But I think
Speaker 1: they're they're difficult to get to and it's probably why
Speaker 1: we haven't seen one yet. Do they continue you to
Speaker 1: kind of take these bites at smaller platforms around the
Speaker 1: edges to get what they want? You know that that
Speaker 1: might be That might be what we continue to see
Speaker 1: is kind of you know, force fit cases that do
Speaker 1: set precedents, but are you after after smaller platforms. I'm
Speaker 1: just curious if Gary Gansler is going to appear in
Speaker 1: an episode of Keeping Up with the Kardashians. I was
Speaker 1: wondering that actually, like because are they're going to have
Speaker 1: a part, like, especially because not on Disney, So I
Speaker 1: wonder how they're going to touch the SEC on registered
Speaker 1: securities topic on Disney Plus. Yeah, I mean that would
Speaker 1: be that would be the perfect example of like a
Speaker 1: mesh of crypto and pop culture. That would just how
Speaker 1: everyone say, Wow, what am I watching? You know, I
Speaker 1: already told Ben I need to watch obviously for homework
Speaker 1: or purposes purposes. Yeah, so, yeah, no, I'm very curious
Speaker 1: at that if that happens as well. All right, Thank
Speaker 1: you Alien Missy for joining us today. Thanks for having me.
Speaker 1: Thank you guys for having us. You can find more
Speaker 1: of their reporting on the Bloomberg terminal, on Bloomberg dot
Speaker 1: com and on Twitter. Ali is at A L l
Speaker 1: y v e R s p r I L l
Speaker 1: E and Missy is at m I S y R
Speaker 1: l E n A. On the next episode of Bloomberg Crypto,
Speaker 1: It's been another busy week for digital assets. What can
Speaker 1: we make of the latest regulatory actions? And now that
Speaker 1: China has banned crypto? Is it really going as planned?
Speaker 1: I'm an area and I'll be breaking down some of
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