A group of investors have filed a class action lawsuit against Tesla CEO Elon Musk, accusing him of insider trading and manipulation of the cryptocurrency Dogecoin, which they claim has cost them billions of dollars. The investors allege that Musk used Twitter posts, paid online influencers, his appearance on NBC's "Saturday Night Live" in 2021 and other publicity stunts to profit at their expense through Dogecoin wallets that he or Tesla controls.
Specifically, the investors claim that Musk sold about $124 million worth of Dogecoin in April after replacing Twitter's blue bird logo with Dogecoin's Shiba Inu dog logo, which led to a 30% increase in Dogecoin's price. The investors accuse Musk of using a "deliberate course of carnival barking, market manipulation and insider trading" to defraud them and promote himself and his companies.
Alex Spiro, a lawyer for Musk and Tesla, declined to comment on the allegations. The investors' lawyer has not yet responded to requests for comment. This is not the first time investors have accused Musk of driving up Dogecoin's price by over 36,000% in two years and allowing it to crash.
The latest accusations were made in a proposed third amended complaint, as part of a lawsuit that began in June 2020. Musk and Tesla sought the dismissal of the second amended complaint in March 2021, calling it a "fanciful work of fiction." On May 26th, they stated that another amendment was unjustified.
In a recent court order, U.S. District Judge Alvin Hellerstein stated that he would "likely" allow the third amended complaint, as the defendants would not likely be prejudiced. Hellerstein also granted the investors' request to dismiss the nonprofit Dogecoin Foundation as a defendant. Its lawyer, Seth Levine, called the dismissal "the appropriate result."
The outcome of this lawsuit will be closely watched by investors and crypto enthusiasts alike, as it could set a precedent for regulating the cryptocurrency market.