July 7, 2022

CRYPTO CONSEQUENCES: Elon Musk sued for market manipulation in “Dogecoin Pyramid Scheme”

CRYPTO CONSEQUENCES: Elon Musk sued for market manipulation in "Dogecoin Pyramid Scheme"

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A $258 billion lawsuit filed Thursday accuses Elon Musk of illegal racketeering. The suit, Johnson v. Musk, alleges the CEO – along with his companies Tesla and Space X – ran a pyramid scheme to manipulate the price of Dogecoin, a cryptocurrency they knew had no value when they promoted it.

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According to plaintiff Keith Johnson:

“Defendants were aware since 2019 that Dogecoin had no value yet promoted Dogecoin to profit from its trading. Musk used his pedestal as World’s Richest man to operate and manipulate the Dogecoin Pyramid Scheme for profit, exposure, and amusement.”

Knowing Musk’s history, it’s something not entirely off-brand. The Tesla CEO has been the subject of multiple lawsuits and SEC investigations accusing him of purposeful market manipulation through the use of social media.

Dogecoin started as a joke in 2013 based on the popular internet meme, and a jump in value began in January 2021. According to the consumer and market data research site Statista, between January 28-29th 2021, after comments from Elon Musk, “Dogecoin’s value grew by around 216 percent to 0.023535 U.S. dollars.” This caused Dogecoin “to become the most talked-about cryptocurrency available.”

The upward trend continued over the next couple of months, as Musk continued to use platforms like Twitter to promote the Shiba Inu-inspired cryptocurrency. In February 2021, Musk tweeted:

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Dogecoin would continue to climb until May 2021, when it reached its peak at $.74 a share. This led to speculation that the cryptocurrency could reach as high as a dollar, and companies began accepting it as payment. In April 2021, Musk promoted an upcoming appearance on Saturday Night Live 10 days later on Twitter with the words “The Dogefather. SNL May 8.”

It’s Musk’s appearance on May 8th, 2021 that would precede Dogecoin’s fall — and be the basis for Johnson’s suit which accuses Musk of “driving up its price, only to then let the price tumble.” On May 19th, cryptocurrencies crashed, and by June 8th, Dogecoin would be worth less than half its peak price per share.

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According to Reuters, Musk’s May 8th appearance on a segment of SNL’s “Weekend Update”, Musk – pretending to be a financial expert – called Dogecoin a “hustle.” And so the sell-off began.

Musk is currently under investigation by the SEC for insider trading related to a series of tweets in 2018 that caused Tesla’s stock to drop dramatically before and after – earning Musk’s brother $108 million in the process. Musk and Tesla split a $40 million SEC fine for stock manipulation.

Johnson alleges Musk violated New York law by “gambling” with the crypto. He is seeking $86 billion in damages and $172 billion in triple damages.

Musk also has lawsuits pending from a Florida police pension fund, and Twitter shareholders.

Follow Ty Ross on Twitter @cooltxchick

Ty Ross

News journalist for Washington Press and Occupy Democrats.

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