Tesla and Twitter CEO Elon Musk is facing a $258 billion lawsuit accusing him of running a pyramid scheme to pump up the prices of the cryptocurrency Dogecoin only to let it all crash down after reaping profits. Here’s what you need to know about the ongoing legal battle of the billionaire entrepreneur.
Investors’ Allegations
According to Reuters, investors alleged that Elon Musk intentionally caused a spike in Dogecoin’s value by more than 36,000% within two years just to let it come crashing down. They said that such a move resulted in billions of dollars of profit for the defendant, which other investors had to fork out and lose along the way.
In addition to that, the investors highlighted the event when Musk appeared on NBC’s “Saturday Night Live” segment called “Weekend Update” where he portrayed a fictional financial expert and referred to Dogecoin as “a hustle.” The hype was all made even though the billionaire knew too well that the currency did not have any intrinsic value based on the accusations.
Musk’s Defense
The lawyers of Musk dismissed the lawsuit by Dogecoin investors as a “fictitious work of imagination” over the billionaire’s “innocent and sometimes silly tweets” about the cryptocurrency. They argued that the investors did not clarify how their client intended to deceive anyone or what risks he concealed.
The legal team of the defense also told the court that Musk’s statements, such as “Dogecoin Rulz” and “no highs, no lows, only Doge,” were too unclear to back a fraud or an investment advisory claim. They refuted the investors’ assertion that Dogecoin is a form of security as well.
Why the Defense Is Seeking Case Dismissal
Musk’s lawyers argued that it is not illegal to tweet support for a legitimate cryptocurrency that has a market cap of nearly $10 billion. They clarified that Musk’s Twitter posts were never meant to be considered as investment advice. The defense also added a footnote stating that the lawsuit filed by Dogecoin investors is nothing but a “fantasy” and should not be taken seriously by the court.
Investors’ Confidence
On the other hand, Evan Spencer, the lawyer of the complainants, stated in an email that he is “more confident than ever” about their case. If the investors can prove that Musk’s tweets were, in fact, investment guidance or intended to defraud anyone, then the case could proceed to trial.
Previous Legal Issues
The Dogecoin case was not the first time Musk got in trouble for his tweets. In the past, multiple court cases have arisen from his statements on the social media network.
One of them stemmed from a claim that he secured enough funding to make Tesla a private entity in August 2018, which never materialized and had consequently misled investors. However, the San Francisco jury’s verdict in February said that he was found not liable for the ensuing events arising from his post.
The Bottom Line
The chances of the Dogecoin lawsuit being dismissed will depend on the merits of the shreds of evidence and arguments made by the parties of the case. However, it should be noted that investors are also required to conduct due diligence before investing their money.
Due diligence refers to the process of researching and analyzing potential investments to make informed decisions. Investors must ensure that they have access to all relevant information before making a decision to invest.
Conducting due diligence involves reviewing financial statements, understanding market trends, assessing risks and potential returns, and verifying the accuracy of any claims or promises made by investment opportunities before acting on them. Investors should seek advice from financial professionals to ensure they are making informed decisions, too.
With that, quoting something made in jest, particularly statements made by a fictional character being portrayed in SNL, may be hard to equate as a sound financial advice. Likewise, it may be hard to pin down DOGE as a security based on the Howey Test, unless the US Securities and Exchange Commission says otherwise.
Nonetheless, if it is determined that the tweets were not investment advice, then the case could be dismissed. Otherwise, the case could proceed to trial, and Elon Musk could face legal consequences.