Tesla CEO Elon Musk accused of dogecoin Ponzi scheme in new class action lawsuit

Quick Take

  • Tesla CEO Elon Musk is facing a class action over his Dogecoin hype.
  • The complainant alleges Musk’s tweets and public messaging drove a significant price spike in DOGE and encouraged people to invest.
  • Those people would ultimately feel the fallout when DOGE price took a nose dive. 

Tesla CEO Elon Musk is facing a new class-action suit that alleges his actions involving the meme-themed cryptocurrency Dogecoin constitute a Ponzi scheme.

Keith Johnson, a US citizen, lodged the suit against Musk and his businesses Tesla and SpaceX on behalf of himself and those similarly situated in the Southern District of New York today.

Johnson claims Musk and his business's activities around Doge defrauded him and other investors in what amounts to a pump and dump scheme.

The complaint alleges that Musk's consistent messaging that he was a fan of the cryptocurrency directly led to its price spike, and when market conditions changed, investors lost out.

"Every statement and endorsement from Defendants on social media regarding Dogecoin has knowingly caused millions of people to spend billions of dollars buying into the Dogecoin Crypto Pyramid Scheme," said the complaint.

Musk has a long history promoting Dogecoin and the complaint highlights the greatest hits of Musk's Doge tweets since a satirical article piqued his interest about the meme coin in 2019. The complaint points out that Dogecoin grew in value following Musk's tweets about it in 2019, which led Musk to self-appoint himself the "CEO of Dogecoin."

The complaint also highlights that Musk engaged with Dogecoin developers and prompted the community to take action, though he would later point out that the Doge community is not a formal organization and no one reports to him as a leader, so his ability to take action in the community was limited.

But Musk's activities weren't just through his personal Twitter account, according to the complaint. He attempted to utilized his businesses to proliferate use of the crypto. Musk claimed Tesla would sell Dogecoin merchandise in 2021 and the electric vehicle maker tested accepting payments in DOGE in 2022. 

In June of this year, Musk finally sold his DOGE at $0.08, a far cry from its May 2021 high of $0.73. After claiming Musk pumped the price ahead of the general crypto crash, it points out that Musk called crypto "a hustle" during an appearance on Saturday Night Live's Weekend Update.  

The complaint seeks $86 billion in monetary damages with $172 billion in treble damages. Treble damages are usually used as a punitive measure – the statute allows a court to impose up to triple the amount in damages. But more than money, the suit wants a Judge to rule that the trading of Dogecoin constitutes gambling under New York and federal law and enjoin unlicensed professionals, like Musk and his firms, from promoting the cryptocurrency.

Musk has a history of legal actions over his Twitter activity.

In 2018 he settled with the Securities and Exchange Commission (SEC) for misleading investors after prematurely tweeting that he intended to take Tesla private. The complaint also pointed to other investigations into Musk's dealings, including an insider trading probe into Musk and his brother Kimbal Musk and an unconfirmed FBI investigation into his dealings with Dogecoin.

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