In a decisive victory for Elon Musk and Tesla Inc., a New York federal judge has dismissed a lawsuit that accused the billionaire entrepreneur of orchestrating a $258 billion “pyramid scheme” involving the cryptocurrency Dogecoin.
The lawsuit, filed by disgruntled investors who claimed they lost tens of thousands of dollars, alleged that Musk artificially inflated the price of Dogecoin through a series of promotional tweets and public statements, only to leave investors holding the bag when the bubble burst.
The plaintiffs’ case hinged on Musk’s frequent and enthusiastic promotion of Dogecoin to his millions of followers on Twitter, now rebranded as X. Statements like “One word: Doge,” and his announcement that Tesla would accept Dogecoin as payment for merchandise were cited as key moments that drove up the cryptocurrency’s value. According to the 2022 complaint, these actions by Musk were the catalysts that turned Dogecoin into a massive speculative bubble, causing substantial financial losses when the price eventually plummeted.
However, US District Judge Alvin Hellerstein saw things differently. In his ruling on Thursday, Hellerstein dismissed the claims, stating that Musk’s statements were “aspirational” rather than factual, and that they were not the kind of statements that a “reasonable investor” would rely on when making financial decisions. The judge emphasized that Musk’s comments were not “factual and susceptible to being falsified,” thereby undermining the plaintiffs’ argument that they had been misled by the Tesla CEO.
This ruling is a significant legal win for Musk, who has been a polarizing figure in both the tech world and the financial markets. His ability to move markets with a single tweet has been both praised and criticized, with some hailing him as a visionary and others accusing him of manipulating markets for personal gain. In this case, the court sided with Musk, effectively endorsing his right to share his thoughts on social media without being held liable for market fluctuations that may follow.
One of the more sensational aspects of the lawsuit involved Musk’s appearance on “Saturday Night Live” in May 2021, where he portrayed a financial expert in a comedic skit about Dogecoin. During the skit, his character was pressed to explain the cryptocurrency and eventually conceded, in a humorous context, that Dogecoin was a “hustle.” The plaintiffs argued that this moment caused Dogecoin to lose $20 billion in market value before the show even finished airing. Despite this dramatic claim, Judge Hellerstein found that the skit did not constitute actionable financial advice, nor did it substantiate the allegation of a “pump and dump” scheme.
The investors also attempted to accuse Musk and Tesla of participating in a “pump and dump” scheme, a common form of securities fraud where the price of an asset is artificially inflated before being sold off at a profit. However, the judge dismissed this part of the complaint as well, stating that it was “not possible to understand” how the allegations connected Musk and Tesla to such a scheme.
Evan Spencer, the attorney representing the plaintiffs, expressed disappointment with the ruling and indicated that his clients plan to appeal. “Musk’s statements and publications were far more than puffery, and a class of millions lost billions of dollars as a result,” Spencer said in a statement. His remarks suggest that this legal battle is far from over, as the plaintiffs are determined to hold Musk accountable for their financial losses.
Dogecoin, which started as a joke cryptocurrency featuring the Shiba Inu dog from the popular “Doge” meme, has seen wild fluctuations in its value, largely driven by Musk’s public endorsements and comments. The token reached a peak in March 2021, but has since fallen by about 54%, reflecting the volatile nature of the cryptocurrency market.
The case, Johnson v. Musk, 22-cv-05037, in the US District Court for the Southern District of New York, Manhattan, highlights the ongoing debate over the influence of public figures on financial markets and the extent to which they should be held responsible for the financial decisions of others. As Musk continues to be a dominant force in both the tech and financial sectors, this ruling may set an important precedent for future cases involving market influence and personal responsibility.
In the end, this dismissal reinforces the notion that while Musk’s tweets and public statements may be influential, they are ultimately just that—statements, not guarantees or promises. Investors are reminded once again of the risks inherent in the cryptocurrency market, and the importance of conducting their own due diligence rather than relying on the words of even the most high-profile figures.
