By Steve Gelsi
Although Kim Kardashian neither admitted to nor denied allegations brought by the Securities and Exchange Commission, the reality-TV personality’s $1.26 million fine for failing to disclose a $250,000 payment by a crypto brand she plugged on social media could discourage some institutional investors from backing her new private-equity fund, a private-market insider told MarketWatch.
The SEC fine against Kardashian for her posting about EMAX tokens comes less than a month after she officially announced the formation of Skky Partners with former Carlyle Group Inc. /zigman2/quotes/200142014/composite CG +0.33% executive Jay Sammons.
A representative of Skky Partners did not reply to an email from MarketWatch inquiring about the SEC fine.
Skky Partners is currently in the private fundraising market with a $1 billion target on its inaugural private-equity fund aimed at control and minority investments in consumer and media companies, according to market sources and private equity data provider Preqin Pro.
Kelly DePonte, managing director at Probitas Partners, a placement agent that helps private-equity firms raise money for funds, said large institutional investors such as pension plans and insurance companies “hate” the idea of backing a firm with so-called headline risk.
While Kardashian wasn’t convicted of a violation, the financial penalty amounts to negative publicity, which “would make it more difficult for Skky to raise money from them,” DePonte said in an email to MarketWatch.
“Certain of these investors — especially public pensions — also have literal policy bans against dealing with fund managers who have been convicted or plead guilty to SEC violations.”
Even if some potential Skky Partners investors walk away from the firm, there are other places in the private markets to turn, particularly in the world of high-net-worth individuals and even corporate strategic investors.
In these circles, Kardashian’s SEC fine may not amount to a major hindrance, according to market sources.
While the $1 billion target for a first-time fund is considered aggressive, Kardashian’s star power could suffice to woo wealthy people and other potential investors.
Skky Partners has yet to disclose a Form D regulatory filing on the type of fund it plans to raise.
In 2015, Kardashian drew a warning letter from the U.S. Food and Drug Administration for not including information about side effects in a positive posting she made on the morning-sickness medicine Diclegis.