Elon Musk and Tesla have won the dismissal of a federal lawsuit accusing them of defrauding investors by manipulating the cryptocurrency dogecoin.
The lawsuit claimed Musk and Tesla engaged in insider trading and other schemes that caused billions of dollars in losses. It was dismissed by U.S. District Judge Alvin Hellerstein in Manhattan on Thursday night.
The lawsuit alleged Musk, the world’s richest person, used a series of tweets, a 2021 appearance on NBC’s “Saturday Night Live,” and other public stunts to artificially inflate the price of dogecoin, only to let it crash later. Investors claimed that Musk and Tesla profited at their expense by trading dogecoin through wallets that they controlled.
Allegations of Market Manipulation
Investors Claim Musk Orchestrated Dogecoin Hype
The investors accused Musk of deliberately driving up the price of dogecoin by more than 36,000 percent over two years. They cited a range of Musk’s public statements and actions.
These included including tweets declaring dogecoin the “future currency of Earth” and suggesting it could be used to buy Teslas. He also stated it could be flown to the moon by his company SpaceX. This was presented as a calculated effort to manipulate the cryptocurrency’s value.
One of the key incidents cited in the lawsuit was Musk’s decision to replace Twitter’s iconic blue bird logo with the Shiba Inu dog logo associated with dogecoin in April 2023.
This move reportedly caused dogecoin’s price to surge by 30 percent. After this Musk was alleged to have sold off a significant portion of his holdings.
Dismissal of the Case
Judge Hellerstein found Musk’s tweets and public statements were “aspirational and puffery.” This means they were not factual claims that could be the basis for a securities fraud lawsuit.
The judge stated no reasonable investor could have relied on these tweets to make investment decisions. He found the investors’ claims of market manipulation and insider trading to be unfounded.
Judge Hellerstein said: “It was not possible to understand” the investors’ claims of market manipulation and insider trading. He dismissed the case with prejudice.
This means the lawsuit cannot be brought again. The investors initially sought $258 billion in damages, They had amended their complaint four times over two years before it was ultimately dismissed.
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Reactions and Implications
Musk’s Legal Team Responds
Following the dismissal, Musk’s lawyer, Alex Spiro, expressed satisfaction with the outcome, stating in an email:
“It’s a very good day for dogecoin.”
Musk’s legal team had argued there was nothing illegal about his “innocuous and often silly tweets. Lawyers said there was no evidence to support the claim Musk or Tesla controlled the dogecoin wallets involved in suspicious trading.
The lawsuit also referenced Musk’s appearance on “Saturday Night Live,” where he referred to dogecoin as a “hustle” during a comedic segment.
Despite this, the court found no grounds for the investors’ claims.
Broader Impact on Cryptocurrency and Social Media
The dismissal of this high-profile case underscores the challenges of proving market manipulation in the volatile and often speculative world of cryptocurrency.
Musk, who purchased Twitter (now rebranded as X) in October 2022, has continued to wield significant influence over digital assets through his social media presence, with even his most casual remarks often moving markets.
As the case concludes, it raises questions about the responsibilities of influential figures like Musk in the cryptocurrency space and the extent to which their public statements can or should be regulated.
