Elon Musk and Tesla Win: Dogecoin Lawsuit Dismissal Explained

2024-09-11, 02:54

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## [TL; DR] 
Judge Alvin Hellerstein dismissed a lawsuit some <a href="/price/dogecoin-doge" target="_blank" class="blog_inner_link">Dogecoin</a> investors had filed against Elon Musk and Tesla.

The Dogecoin investors made several material misrepresentations which led to the dismissal of the case.

Musk’s victory leaves room for other celebrities to endorse digital assets of their choice.

## Introduction
The cryptocurrency sector has witnessed many lawsuits over the years. Although most of these lawsuits were initiated by national governments some were filed by investors. One of the hurdles faced when handling these legal battles is lack of crypto legislation. As a result, many countries use laws designed for the traditional financial sector. Today, we analyze the outcome of the Elon Musk and Tesla versus Dogecoin Investors case.

## Musk and Tesla versus Dogecoin Investors: Nature of the Lawsuit
On 29 August US District Judge Alvin Hellerstein of the Southern District of New York dismissed a $258 billion lawsuit some Dogecoin investors filed against Elon Musk and Tesla in June 2022. The investors who include Keith Johnson alleged that Elon Musk and Tesla manipulated the <a href="/price/dogecoin-doge" target="_blank" class="blog_inner_link">Dogecoin price</a> for their benefit. They claimed that Musk used several means to influence the Dogecoin price to rise by 36,000% before it crashed. In fact, the investors claimed that Musk, Tesla and SpaceX were involved in a pyramid scheme using DOGE. They insisted that these parties enticed people to <a href="/crypto/buy/dogecoin-doge" target="_blank" class="blog_inner_link">buy Dogecoin</a> at an inflated price.

The investors also alleged that Musk used his high profile public personality and social media influence to lure people to acquire Doge. They cited Musk’s participation in NBC's Saturday Night Live in 2021 as one of the events that influenced investors to purchase DOGE at a high value. Sadly, after the Dogecoin price surged by about 36,000% it plummeted leading many investors to lose much funds. They claimed that Musk, Tesla and SpaceX benefited since they timed their trades to maximize their gains. The investors also said that Musk used misleading language such as “the future currency of Earth”, “the people's crypto”, and his “favorite currency” to mislead investors.

The complainants further alleged that Musk had multiple digital wallets with DOGE which he sold at profit. They also cited a time when Musk replaced the X logo with the Dogecoin <a href="/price/icon-icx" target="_blank" class="blog_inner_link">icon</a> which pushed its value up by about 30%. In all, they claimed that Musk unjustly enriched himself by over $86 billion due to gambling, wire fraud, deceptive practices and false advertising. On the other hand, Johnson said that they collectively lost over $86 billion between May 2021 and June 2022. As a result, they claimed compensation for that loss plus $172 billion to cover for damages and fees.

## Has Musk Created a Ponzi Scheme Using DOGE: His Relationship with the Cryptocurrency
After looking at the accusations against Musk let’s assess his involvement with Dogecoin. There is no question that Musk has been an influential personality in the cryptocurrency sector since he has much interest in blockchain technology. And from the very beginning he was a strong supporter of Dogecoin. At one time he referred to himself as the “Dogefather.” In addition, he often tweeted about DOGE which usually influenced its price to fluctuate. However, it is important to realize that Musk’s tweets were usually humorous. In one of his Twitter posts in 2021 Musk called Dogecoin his favourite cryptocurrency.

The relationship between Dogecoin and Musk developed into a business one. For example, there was a time that Tesla updated its system to accept DOGE as a means of payment. The fact that Musk plans to incorporate Dogecoin as a means of payment in his companies shows that he has much interest in it.

## Legal Reasons for the Dismissal of the Lawsuit Again Musk and Tesla
On 31 March Musk in crypto requested the court to dismiss the lawsuit. In fact, in a New York federal court he described the lawsuit as “fanciful work of fiction”. Also, Musk’s legal team argued that the law does not prohibit people from posting humorous and supportive tweets about crypto assets such as Dogecoin digital currency. They further argued that Dogecoin is a legitimate cryptocurrency that has a market capitalization of around $10 billion.The team also emphasized that Musk’s tweets were harmless and that there was no connection between them and the Dogecoin suspicious trading activities.

Pertaining the Doge lawsuit dismissal Judge Alvin Hellerstein said that the defendants had made material misrepresentations of Musk’s tweets about Dogecoin meme. Some of the [misrepresentations related to the statements which Musk made](https://www.pacermonitor.com/public/case/44928222/Johnson_v_Musk_et_al "misrepresentations related to the statements which Musk made") which included the phrases:  “Dogecoin might be his favorite currency and that he had purchased some for his son, that Dogecoin is the people's crypto and the future currency of Earth, that Dogecoin might become the standard for the global financial system and the currency of the internet, that Musk agreed to become Dogecoin's CEO, and that Musk might put a "literal" Dogecoin in SpaceX and fly it to the moon and that Dogecoin would pay for the mission, that Tesla vehicles could be bought with Dogecoin, and the like.”

The judge said that the defendants failed to provide factual and convincing arguments, even after multiple revisions of their claims. According to the judge the statements which the defendants cited about Musk were “aspirational and puffery, not factual and susceptible to being falsified.” Therefore, they were not suitable to be part of a lawsuit for Doge legal battle. The judge clarified: “As for Musk and Tesla's alleged "pump and dump" scheme, it is not possible to understand the allegations that form the basis of Plaintiffs' conclusion of market manipulation, a "pump and dump" scheme, a breach of a fiduciary duty amounting to insider trading, or the state law claims.”

Read also: [Dogecoin Price Drops as Elon Musk Returns Twitter Logo](https://www.gate.io/blog/2507/dogecoin-price-drops-as-elon-musk-returns-twitter-logo "Dogecoin Price Drops as Elon Musk Returns Twitter Logo")

## Market Reaction on Musk and Tesla Win: Dogecoin Remains Flat
The price of the [Doge cryptocurrency](https://www.gate.io/learn/articles/what-is-dogecoin/36 "Doge cryptocurrency") did not fluctuate much after the Doge lawsuit dismissal on 29 August. Its value rose by merely 1.1% within 24 hours to trade between $0.09836 and $0.1026. Generally, though, DOGE has performed well this year as it has gained by 55.8%. On the other hand, Tesla’s shares gained by about 15.38% within the last three months. Basically Musk and Tesla’s win has not influenced the stock in a significant way.

## Musk and Tesla Win: How it will Affect Celebrity Endorsement of Crypto 
Celebrity influence on cryptocurrency has been common in the sector. The celebrity crypto endorsement and promotions have often resulted in mass adoption of specific cryptocurrencies. In some cases some crypto assets experienced significant price fluctuations after influential individuals talked about them. Based on crypto investment trends the endorsement of digital assets by high profile figures can lead to price volatility and losses.

Elon Musk’s win in the Dogecoin lawsuit has likely emboldened high profile public figures and celebrities to endorse cryptocurrencies of their choices without fear of legal actions. However, this victory does not mean that the celebrities should make false or misleading claims about the digital assets. They should also avoid doing things which the market can interpret as price manipulation. On the other hand, this should be a big lesson for regulators who should craft laws that protect consumers and limit the negative influence of high profile personalities.

Read also: [Is It Too Late to Buy Dogecoin in 2024?](https://www.gate.io/learn/articles/is-it-too-late-to-buy-dogecoin-in-2024/2853 "Is It Too Late to Buy Dogecoin in 2024?")

## Conclusion 
On 29 August US District Judge Alvin Hellerstein dismissed the lawsuit some DOGE investors filed against Elon Musk and Tesla. The judge concluded that the defendants made several material misrepresentations and failed to prove beyond doubt that Musk and Tesla manipulated the Dogecoin price. This victory has given a green light to celebrities and other high-profile figures to endorse cryptocurrencies of their choice, as long as they do that responsibly.

<div class="blog-details-info">
<div>Author: Mashell C., Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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