Tesla CEO, Elon Musk, and his electric vehicle company have successfully defended themselves in a major lawsuit that accused them of manipulating the price of popular cryptocurrency Dogecoin ($DOGE).
The lawsuit, which sought an enormous $258 billion in damages, was dismissed by a US federal judge, marking a significant victory for Musk and Tesla.
Background of the lawsuit
The legal case began in June 2022, when a group of investors filed a lawsuit against Musk and Tesla.
These investors claimed that Musk had artificially driven up the price of Dogecoin by more than 36,000% over a two-year period, only to let the price crash later.
They argued that Musk used his immense influence as the world’s richest man to deceive people and operate what they called a “Dogecoin Pyramid Scheme”.
The investors pointed to several instances where Musk’s actions appeared to directly impact the price of Dogecoin.
For example, they noted that Musk often posted tweets about Dogecoin, made appearances on shows like “Saturday Night Live”, and even changed Twitter’s logo to the Dogecoin Shiba Inu dog.
They alleged that these actions were designed to manipulate the market, encouraging investors to buy Dogecoin, which in turn inflated its price.
According to the lawsuit, Musk then took advantage of these price increases by selling his own holdings of Dogecoin, profiting at the expense of other investors.
Musk’s defence
In response to these accusations, Musk and his legal team filed a motion to dismiss the lawsuit in March 2023.
They argued that the claims made by the investors were exaggerated and baseless, calling the lawsuit a “fanciful work of fiction”.
They also maintained that the demand for $258 billion in damages was unrealistic.
The ruling in favour of Musk and Tesla came on 29 August, given by US District Judge Alvin Hellerstein, based in Manhattan.
In his decision, Judge Hellerstein stated that the investors had misinterpreted many of Musk’s statements about Dogecoin.
For example, Musk had once joked on Twitter that he might become the CEO of Dogecoin and even suggested sending a literal Dogecoin to the moon on a SpaceX rocket.
The judge labelled these remarks as “aspirational and puffery”, meaning they were simply exaggerated claims that no reasonable person would take seriously as factual statements.
Judge Hellerstein also pointed out that it was difficult to see how Musk’s tweets could be used to support the investors’ claims of market manipulation and insider trading.
As a result, he decided to dismiss the lawsuit with prejudice, which means that the investors cannot bring the case back to court.
Hellerstein concluded, “No reasonable investor could rely on these statements as sound investment advice”.
Impact on DOGE and Tesla
The dismissal of the lawsuit has had a surprisingly little immediate impact on Dogecoin’s market value.
At the time of the ruling, Dogecoin was trading at around $0.10, a price that had actually dipped by 20% over the previous month, according to data from CoinGecko.
As for Tesla, the company’s stock saw a slight increase following the court’s decision. Shares of Tesla closed 0.26% higher at $206.28 during Thursday’s regular trading session.
While the rise in Tesla’s stock price was modest, it reflected a positive reaction from investors who were likely relieved that the company had avoided the potential financial and reputational damage that could have resulted from a prolonged legal battle.
The dismissal of this high-profile lawsuit for Elon Musk and Tesla not only spares them from the burden of a potentially costly legal dispute but also sets a precedent for how courts may view similar claims of market manipulation in the future.
