Elon Musk, Tesla, and SpaceX were hit by a $258bn (£210.2bn) lawsuit on Thursday by a Dogecoin investor accusing them of running a “Crypto Pyramid Scheme (aka Ponzi scheme)” relating to the cryptocurrency.
The complaint, filed in a Manhattan court, alleged that the world’s richest man and the two companies he runs, electric vehicle maker Tesla and spacecraft manufacturer SpaceX, were engaged in a “fraudulent” scheme concerning Dogecoin.
Plaintiff Keith Johnson, seeking to represent a class of people, claimed that the cryptocurrency was a “fraud whereby ‘greater fools’ are deceived into buying the coin at a higher price.”
The plaintiff said he and other investors in Dogecoin lost about $86bn (£69.9bn) since 2019 after Musk, Tesla, and SpaceX began supporting Dogecoin, which has slumped -91.8% between May 2021, when it hit a high of 74 cents to Thursday, selling at six cents. He is seeking the lost amount plus $172bn (£140.2bn) in damages and wants Dogecoin investing to be legally declared gambling.
The complaint alleged that Musk knew his tweets about the token directly affected its price, market cap, and trading volume. It listed the multiple times the billionaire personally and through his companies had promoted Dogecoin, and the subsequent impacts on its price.
“Dogecoin is not a currency, stock, or security. It’s not backed by gold, other precious metal, or anything at all. You can’t eat it, grow it, or wear it,” Johnson further told the court on June 15 in the documents.
“It doesn’t pay interest or dividend. It has no unique utility compared to other cryptocurrencies…It’s not secured by a government or private entity. It’s simply a fraud whereby ‘greater fools’ are deceived into buying the coin at a higher price.
“Since defendant Musk and his corporations Spacex and Tesla Inc. began purchasing, developing, promoting, supporting, and operating dogecoin in 2019, [the] plaintiff and the class have lost approximately $86 billion in this crypto pyramid scheme”, he added.
Between 2019 when Musk started actively tweeting about Dogecoin and 2021, when he reduced his public support on the social media platform, which is the billionaire’s most used communication channel, he has tweeted about the cryptocurrency more than 10 different periods.
In one of such tweet, on April 2, 2019, he wrote, “Dogecoin might be my fav cryptocurrency. It’s pretty cool.”, after a Twitter poll was held to vote the Chief Executive Officer of Dogecoin, if it was a company.
However, in another tweet on February 15, 2021, he advocated for a sell off of Dogecoin, which he said will favour the cryptocurrency in the longterm, “If major Dogecoin holders sell most of their coins, it will get my full support. Too much concentration is the only real issue imo.” Adding that, “I will literally pay actual $ if they just void their accounts”
But when his statement was questioned by a Twitter user, regarding the possibility of the sell off devaluing Dogecoin, the world’s richest man responded, “Temporarily lower, long-term raise.”
Although, in one of his numerous tweet about Dogecoin, he had warned on May 25, 2021, that, “Please note Dogecoin has no formal organization & no one reports to me, so my ability to take action is limited,” he wrote.
