🗞️ Kim Kardashian's Krypto Kalamity, Is Big Tech's Shield Weakening? And Monster Madness
This Week: Kim K gets an unwelcome tag from the SEC, Big Tech may no longer be able to shield itself from terrorism cases, and the energy drink market is much wilder than you ever thought. Plus, Big Law is tightening its belt, and a look at Elon Musk's text threads.
Kim Kardashian is back in the headlines, though maybe for a reason she didn't expect. On Monday, the SEC charged the reality-TV-turned-social-media star with failing to disclose her own compensation from EthereumMax while promoting their EMAX tokens on social media last year. "This case is a reminder that, when celebrities or influencers endorse investment opportunities, including crypto-asset securities, it doesn’t mean that those investment products are right for all investors," Gary Gensler, chair of the SEC, said in a press release. Kardashian, who was reportedly paid $250,000 to post about EMAX on her Instagram in June 2021, has agreed to settle with the market regulator for $1.26 million, and cooperate with their ongoing investigation.
"She wanted to get this matter behind her to avoid a protracted dispute," an attorney representing Kardashian in the matter said, notes the LA Times. "The agreement she reached with the SEC allows her to do that so that she can move forward with her many different business pursuits."
"If you're advertising perfume, or you're advertising vacation homes, or anything else on the Internet, there are various laws related to that," Gensler told CNBC's Squawk Box. "But these are the securities laws, and [with] those other laws [it] might be appropriate to just say '#ad', but in the securities laws Congress put into place, you have to disclose not only that you're getting paid, but the amount [and] nature of it."
A flood of celeb endorsements for crypto-based assets hit the media during much of 2021 and seemed to reach its peak at this year's Super Bowl. Many of the celebrities making the endorsements failed to disclose their own involvement in the asset they were promoting (whether that was ownership of the asset or compensation). "Ms. Kardashian’s case also serves as a reminder to celebrities and others that the law requires them to disclose to the public when and how much they are paid to promote investing in securities," Gensler noted, writes The New York Times. Beyond crypto, celebrities also helped promote SPACs (or Special Purpose Acquisition Companies) during the market's gold rush in 2021.
We're not sure what version of the simulation is the one in which Kim Kardashian, the SEC, and crypto share a headline — but here it is. Yes, of course, you should not be getting your financial advice solely from reality TV and/or social media stars. Yes, those endorsements should come with a disclaimer about compensation. But can we also just stop and appreciate this krazy krypto k'moment?
⏱ The Countdown’s On
Have you heard? We’re in the running to win regional Best Tech Startup for the 8th annual Timmy Awards by Tech in Motion — a program dedicated to celebrating the top tech workplaces across North America. Voting ends today, and we’d love it if you could help us cinch a place in the North American round.
So like, share, repost, spread the news … and cast your vote here!
Did YouTube aid and abet in the 2015 killing of Nohemi Gonzalez, or does Section 230 of the Communications Decency Act shield the tech giant? That is the question heading to the US Supreme Court in the high court's new term. Gonzalez was one of the 130 people killed during a coordinated terrorist attack in Paris that saw the Bataclan concert venue and neighboring restaurant hit by suicide bombers. The victim's family is claiming YouTube's algorithm helped ISIS recruit the assailants who then killed the American.
The Alphabet-owned video platform "knowingly permitted ISIS to post on YouTube hundreds of radicalizing videos inciting violence," claims the lawsuit, according to NBC News, adding that Section 230 does not cover such practices.
YouTube is denying its culpability in this case, and urged the court not to hear the case as it would "likely fail whether or not Section 230 applies."
In a June 2021 opinion written by Judge Morgan Christen of the 9th Circuit Court of Appeals, the three-justice panel sided with Gonzalez's estate and further revived the case of Nawras Alassaf, a Jordanian citizen who was killed during a 2017 ISIS attack in Istanbul. Alassaf's family is suing Twitter, Meta, and Alphabet for aiding and abetting ISIS in spreading its ideology. Alassaf's case will join Gonzalez's and three others when it heads to the Supreme Court to decide if Section 230 shields Big Tech from such situations, reports VOA News.
What other industry is able to hide behind a single clause in an outdated law despite having its hand in nearly every part of our lives? We might be in a perfect storm situation where both liberals and conservatives are seeing Big Tech as the Boogeyman and are willing to come together to change the laws shielding Silicon Valley.
📰 A Moment in the Press
Mobile Discovery: ICYMI, we’ve launched an app. And, we’re thrilled to receive a feature from Jessica Bursztynsky at Fast Company. In addition to its various features, the app will help the over 2,000 legal professionals on the platform connect with clients more easily.
Strategy Shift: Our CEO and founder Raad Ahmed spoke with Legal Dive about the company's journey to a record $1M monthly revenue, a target hit in August. Ahmed describes how the pandemic led to an increased demand for flexible, on-demand talent which helped "spark significant growth in the number of companies utilizing Lawtrades [to] 100 business customers, including Yelp, Cruise, AngelList, Headspace, and Duolingo."
Stand aside, TS Eliot. Monster Energy's trade secrets and false advertising suit didn't end with a whimper, but with a bang. Bang Energy, that is. A federal judge awarded Monster $293 million in damage — reports Bloomberg — after they sued Vital Pharmaceuticals (or VPX, the maker of Bang) over claims that the company had created a "super" form creatin that it sold in its drinks. "The jury recognized that VPX built its billion dollar Bang energy drink on a lie," Monster’s co-lead counsel John Hueston told Bloomberg. He added that Bang's number three place in the market "was based on their lie" that they had invented the supposed "super creatin."
According to Reuters, the $293 million award breaks down as "$272 million for false advertising, $18 million on claims that Bang interfered with [Monster’s] contracts with retailers for prominent shelf spaces, and $3 million on claims that Bang stole trade secrets from former Monster employees it recruited."
Beyond the Monster case, Bloomberg adds that VPX has also faced suits from several major record labels for using their music without a license in promotional TikToks. Two of those suits resulted in a ruling against VPX.
A Messy Past
Not only is this the second time Monster has taken VPX to court and won (an arbiter awarded Monster $175 million in a previous trademark infringement case, says Reuters), but VPX has also gone to court with PepsiCo (who makes Rockstar Energy) over claims that the beverage giant violated their distribution deal. In a June statement, VPX said that "all disputes with PepsiCo have been fully settled and resolved," and that Bang will "transition from PepsiCo distribution to Bang Energy’s new DSD partners."
Might be time to wean off the caffeine and drink some water, VPX. Too many lawsuits and broken deals are not a good look for a company wanting longevity. We know the mantra is "move fast and break things," but when you're losing several expensive, high-profile cases against the biggest names in the game — maybe it's time to slow down.
📤 What Else We're Forwarding
Dreams Deferred: With news that Gunderson Dettmer is delaying its incoming first years, AboveTheLaw.com asks if the move is a canary in the coal mine for Big Law. Is the firm’s belt-tightening a sign that the boom of the last 2 years is curdling into a bust?
Text Thread: Court filings ahead of the much-anticipated Musk-Twitter showdown have revealed some rather juicy texts between Musk, Twitter CEO Parag Agrawal, founder Jack Dorsey, and others, writes TechCrunch. Things started cordially enough between the parties but later on, after one exchange, Dorsey commented on Agrawal and Musk’s dynamic saying "At least it became clear that you can’t work together. That was clarifying."
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See ya next week!