What do T.I. and Kim Kardashian have in common? They both have run afoul of SEC disclosures.

Kardashian has to pay the Securities and Exchange Commission (SEC) a total of $1.26 million for her failure to disclose a payout for promoting a cryptocurrency.

According to the SEC’s official website, Kardashian received $250,000 from EMAX tokens, a cryptocurrency offered by EthereumMax. While SEC disclosures don’t forbid “influencers” to receive compensation for promoting crypto-coins, they do require that said influencers disclose when they receive payment for said promotion, which Kardashian didn’t do. As a result, she has agreed to pay a fine.

“The federal securities laws are clear that any celebrity or other individual who promotes a crypto asset security must disclose the nature, source, and amount of compensation they received in exchange for the promotion,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, in the official release. “Investors are entitled to know whether the publicity of a security is unbiased, and Ms. Kardashian failed to disclose this information.”

Kardashian neither admitted nor denied the SEC’s allegations.

This isn’t the first time that celebrities have been caught running afoul of SEC disclosure rules.

Back in September 2020, T.I. (real name: Clifford Harris) was fined $75,000 over what Bitcoin’s official website called “fraudulent initial coin offerings (ICOs).” To be more specific, the crypto coins that he touted — called flik tokens — were unregistered securities. Moreover, the SEC confirmed that T.I. sold the coins on his social platforms, falsely claimed to be a co-owner of the venture, and even had his celebrity friends pushing the venture on their own social platforms.

For his part, T.I. claims that the real mastermind behind the scheme, film producer Ryan Felton, defrauded him, and he “never received a dime” for his participation. However, like Kardashian, T.I. never admitted nor denied the SEC’s allegations.

All of these recent snafus have led us to wonder what, exactly, SEC disclosures entail, and what celebrities — and others — can do to avoid running afoul of the government agency in the future. Here are a few tips and tricks.

Editorial note: AfroTech makes no representation about the cryptocurrency information provided herein, and neither is the information meant to be construed as financial advice. The information presented herein is solely meant to be informative in nature. Consult with a licensed financial professional before investing your money.

SEC Disclosures: The Basics

The SEC’s official website has a myriad of rules about their various disclosures, and while it can seem like their requirements are nothing if not convoluted, Investopedia has broken down the basics of their requirements. Put simply, any publicly listed company — regardless of whether it deals in traditional or digital fiat/currency — has to disclose any and all financial stakes.

So, for example, Kardashian was required to disclose that she was being paid for her advertisement of the cryptocurrency — and was fined because she failed to do so. T.I., meanwhile, falsely claimed that he was a part-owner of the company he was advertising — and was fined because he did so.

What Are Some Penalties For Failure To Disclose?

The penalties for failure to properly follow the SEC guidelines vary.

Many SEC disclosures fall under civil rules, and the Division of Enforcement says that violators can expect to pay fines and, like T.I., be barred from participating in the cryptocurrency market for at least five years, according to Rolling Stone.

But in the event that SEC disclosure failures involve monetary fraud, criminal charges may be forthcoming. While the SEC can neither send people to jail nor pursue criminal charges against an alleged perpetrator, they can refer their findings to the Justice Department for federal prosecution, according to the Division of Enforcement.