Elon Musk Faces Dogecoin Lawsuit

Posted by Matin Varshochi in CryptocurrencyJune 27, 2022(Last Updated July 29, 2022)3 min read
Key Takeaways
  • Chief Executive Officer of Tesla and SpaceX, Elon Musk is being sued for $258 billion regarding his role in Dogecoin’s downfall. 
  • The main plaintiff, Keith Johnson, alleges in the lawsuit that Elon Musk set up a pyramid scheme with Dogecoin, allowing his companies to profit generously from the price surge the coin experienced in 2021. 
  • This incident presented a learning experience to both new and expert investors.
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Recently, the Chief Executive Officer of Tesla and SpaceX, Elon Musk, received a class-action lawsuit regarding his role in promoting Dogecoin on social media. The main plaintiff, Keith Johnson filed the lawsuit, alleging that Musk manipulated the coin's value and designed a pyramid scheme for personal gain. Due to the serious allegations against Musk, he is being sued for $258 billion. 


What is a Pyramid Scheme?


A pyramid scheme is a fraudulent business technique that aims to raise money by misleading people into believing that their money will rise quickly over time. For example, during the time when Musk was discussing Dogecoin on his Twitter, the altcoin continued to shatter its all-time highs and kept increasing its market cap


However, the price of the virtual currency began tumbling heavily when Musk appeared on Saturday Night Live (SNL) and called Dogecoin “a hustle.” When Musk made this remark on live television, the price plummeted by nearly 30%, leaving many people who invested in the cryptocurrency in a poor financial position.


Details of Dogecoin Lawsuit


Johnson, a Dogecoin investor, is leading the lawsuit against Musk. In his filing with a Manhattan federal court, he alleged that the world’s richest man used his vast influence online to help conduct a pyramid scheme, aiming to raise the digital asset's price as much as possible before dumping it. 


Johnson goes on to say in the lawsuit that Musk allegedly used his electric vehicle company Tesla and space exploration technology company SpaceX’s resources to buy large sums of Dogecoins. After purchasing the cryptocurrency at a low cost, Musk would then begin promoting it on his social media platform to increase exposure and, ultimately, the price, allowing his companies to make large sums of money.  


Due to the seriousness of these allegations, Johnson is seeking $86 billion in damages, as that is how much Dogecoin has lost in value since Musk’s remarks on SNL tanked the coin’s value. However, he is suing for $258 billion, as that is triple the amount of money Dogecoin lost, so affected investors can be fairly compensated for the financial implications Musk’s actions have had. 


In addition to the monetary compensation, Johnson is seeking that Musk and his companies are blocked from promoting Dogecoin so a similar event does not occur in the future.


Image Credit: surassawadee / Shutterstock.com

Impacts of the Dogecoin Lawsuit on the Crypto Market


Regardless of whether or not this lawsuit goes to trial, it does raise some concerns regarding precautions to take when investing in cryptocurrency going forward.


One of the main issues with cryptocurrency is, that the lack of regulation in the market allows some people to influence the market to their liking without necessarily facing any repercussions. The reason why this lawsuit occurred is due to the fact many people did not do their research before investing in the cryptocurrency Musk was promoting. 


Although Musk played a role in Dogecoin’s price surge, he should not be held accountable for other investors’ investment decisions. Everyone who has the power to invest in Dogecoin also has the power to make their own decisions, so they cannot blame Musk for the steep decline in the coin’s value. 

Therefore, the lesson to be taken away from this incident is although Musk helped the coin rise in value, he never forced anyone to purchase the cryptocurrency against their will. Those who did not research the cryptocurrency prior to investing were allowing themselves to take on more risk, resulting in them ultimately losing money.


The Money Wrap-Up


Investors who earn a significant return on their investments generally research the company before investing their money. By doing so, the investor gets a better understanding of the company’s operations and its financial position, leading to them making a more informed decision.


Those who invested in Dogecoin for the purpose of getting rich quickly or because of Musk’s comments online should not hold the multi-billionaire accountable for their financial loss. Investors should have conducted independent research on the cryptocurrency to have a better understanding of the coin’s value before investing their money.


No one knows whether the courts will hold Elon Musk financially responsible for the downfall of Dogecoin’s value. However, this event can be considered a lesson for those who invest blindly without doing their due diligence. Even for those who may have done significant research on Dogecoin or the crypto industry in general, couldn’t have predicted a financial loss or gain. 


Main Image Credit: Oporty786 / Shutterstock.com

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