Elon Musk and Tesla Inc. have successfully dismissed a high-profile lawsuit that accused them of manipulating the price of Dogecoin in what was alleged to be a $258 billion "pyramid scheme."
Investors who claimed to have lost significant sums in Dogecoin argued that Musk’s promotion of the cryptocurrency on Twitter (now X) and his public endorsements inflated its value, only for it to crash later.
The lawsuit, filed in June 2022, centered around Musk's tweets, including statements like "One word: Doge," and his announcement that Tesla would accept Dogecoin as payment for merchandise.
Investors alleged these actions were part of a deliberate effort to pump up the price of Dogecoin, leading to a meteoric rise of over 36,000% before the market ultimately plummeted. They also accused Musk and Tesla of engaging in a “pump and dump” scheme, claiming that Musk's influence over the market led to billions in losses when the coin's value dropped.
A pump and dump scheme in crypto is a fraudulent practice where a group of people artificially inflate the price of a cryptocurrency by spreading positive news or hype (the "pump"). Once the price is high, they sell off their holdings for a profit, causing the price to crash (the "dump"), leaving other investors who bought in during the hype with losses.
However, US District Judge Alvin Hellerstein of Manhattan dismissed the case, concluding that Musk’s statements were "aspirational and puffery," rather than concrete facts that could mislead reasonable investors.
Judge Hellerstein noted that such statements were not “factual and susceptible to being falsified,” making it unreasonable for investors to base their financial decisions on them. Furthermore, the judge found the allegations of a "pump and dump" scheme too vague to support claims of market manipulation.
The ruling marks a significant legal victory for Musk and Tesla, particularly in light of Musk's ongoing influence in the cryptocurrency market. For example, when Musk appeared on Saturday Night Live in May 2021 and humorously referred to Dogecoin as a “hustle,” the coin's market value plummeted by $20 billion during the broadcast.
Despite the lawsuit's dismissal, the plaintiffs' attorney, Evan Spencer, expressed disappointment, stating that Musk’s actions were far more than mere puffery, leading to significant financial losses for millions of investors. Spencer indicated that his clients plan to appeal the ruling.
Dogecoin, which began as a meme featuring the Shiba Inu dog, has experienced extreme volatility largely due to Musk’s endorsements. Notably, Dogecoin surged over 70% in October 2022 following Musk's acquisition of Twitter, and again by 30% in April 2023 when Musk changed the Twitter logo to the Dogecoin mascot.
However, a more recent tweet from Musk joking about leading a “Department of Government Efficiency” (D.O.G.E for short) saw only a modest 5% increase, suggesting that the cryptocurrency’s sensitivity to Musk’s influence may be waning.
As of today, Dogecoin remains relatively stable, trading at around $0.1012, reflecting a 0.06% increase.
