Court Clears Musk and Tesla of Dogecoin Manipulation Allegations

A lawsuit alleging that Elon Musk and his companies Tesla and Spacex artificially inflated dogecoin's price was dismissed by U.S. District Judge Alvin Hellerstein

A lawsuit alleging that Elon Musk and his companies manipulated the price of dogecoin (DOGE) for personal gain has been dismissed by a U.S. District Judge in Manhattan.

The lawsuit, filed by dogecoin investor Keith Johnson in June 2022, accused Musk, Tesla, and Spacex of being involved in a crypto pyramid or Ponzi scheme using DOGE. The plaintiff claimed that dogecoin is “simply a fraud” that deceives investors into buying at inflated prices.

The plaintiffs argued that Musk used his social media influence and high-profile public appearances, such as his 2021 hosting of NBC’s Saturday Night Live, to artificially inflate dogecoin’s price by over 36,000% over two years. They alleged that after driving up the price, a crash occurred, leading to heavy losses for investors while Musk and Tesla supposedly profited by carefully timing their trades based on Musk’s public endorsements of the cryptocurrency.

However, U.S. District Judge Alvin Hellerstein dismissed the lawsuit on Thursday, ruling that the plaintiffs failed to provide convincing evidence to support their allegations, despite multiple revisions of their claims.

“Throughout the amended complaint, plaintiffs allege that Musk engaged in a scheme to manipulate the dogecoin price,” Hellerstein wrote in his decision. “Yet, they fail to plead any facts suggesting that Musk actually sold dogecoin at an inflated price or otherwise personally profited from the alleged scheme. Plaintiffs’ theory appears to be that Musk’s tweets drove up the price of dogecoin, which in turn caused other people to buy dogecoin at an inflated price, suffering losses when the price inevitably fell.”

The judge noted that the plaintiffs had failed to allege any facts suggesting that Musk was aware of or participated in any suspicious trading activities or sales of dogecoin. He added that the plaintiffs’ claims were “too attenuated” and that they had failed to state a claim upon which relief can be granted.

“Plaintiffs have not alleged facts that plausibly suggest that Musk caused their dogecoin investment losses,” Hellerstein concluded. “The court therefore grants Musk’s motion to dismiss the amended complaint as to him without leave to amend further.”

Musk and his legal team had previously sought to have the case thrown out, arguing that there was no law against posting supportive or humorous tweets about a legitimate cryptocurrency that has a market cap nearing $10 billion. They labeled the lawsuit as a “fantasy” and urged the court to dismiss it.

“This is a complaint that alleges, over and over again, that Mr. Musk tweeted supportive things about dogecoin, and that caused people to buy dogecoin,” Musk’s attorney Alex Spiro said during opening arguments in April 2023. “And then, when the price went up, they held it for a period of time, and then the price went down, and they lost money.”

“What else did they expect to happen?” Spiro asked the court. “This is not a security. This is not an investment contract. There is no law anywhere that says you can’t post supportive tweets about a legal cryptocurrency.”

Spiro further argued that Musk’s tweets were harmless and playful, and that there was no evidence linking Musk or Tesla to the alleged suspicious trading activities or sales of dogecoin. He pointed out that Musk never mentioned selling any of his dogecoin holdings.

“There is no allegation that Elon Musk ever sold a single dogecoin,” Spiro said. “There is no allegation that Tesla ever sold a single dogecoin. There is no allegation that Spacex ever sold a single dogecoin.”

“This is a fantasy,” he concluded. “This complaint should be dismissed.”

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