Thomas Daniels
A United States court has dismissed a $258 billion class action lawsuit alleging that Elon Musk and his companies, SpaceX and Tesla, orchestrated a “crypto pyramid scheme” involving Dogecoin. Nearly two years after the case was filed, Judge Alvin Hellerstein of the US District Court for the Southern District of New York ruled to drop the lawsuit seeking substantial damages.
The plaintiffs claimed that Musk exploited his position as the world’s richest individual to inflate Dogecoin’s price by over “36,000%” before allowing it to crash, leading to significant losses for investors. The suit portrayed Musk’s actions as part of a “Dogecoin Pyramid Scheme,” accusing him of promoting the cryptocurrency to profit from the ensuing market volatility.
The lawsuit also referenced Musk’s appearance on Saturday Night Live in 2021, during which he played a financial expert and referred to Dogecoin as “a hustle.” Following his remarks, the price of Dogecoin plummeted by over 25% from an all-time high of $0.73, a level it has not reached since.
In his August 29 decision, Judge Hellerstein characterized Musk’s statements about Dogecoin as “aspirational and puffery, not factual,” and noted that these statements were “susceptible to being falsified.” He further stated that “no reasonable investor could rely upon them” for making investment decisions.
Judge Hellerstein also determined that the facts did not substantiate the plaintiffs’ claims of a “pump and dump” scheme, market manipulation, or insider trading. He emphasized the difficulty of understanding the allegations that underpinned these accusations.
Musk’s legal team had previously called for the dismissal of the suit, arguing that the Tesla CEO’s support for Dogecoin on social media was too vague to constitute fraud.
Dogecoin’s price remained largely unaffected by the court’s decision, still down 86.4% from its peak. Over time, Musk has distanced himself from the cryptocurrency sector. Although Tesla briefly accepted Bitcoin as a form of payment, it soon reversed this decision. Nonetheless, Tesla has retained its Bitcoin holdings, as indicated in its Q1 2024 earnings report.
