In a stunning 30% decline in just one year, the cryptocurrency market has been experiencing an unprecedented downturn. One of these coins is Dogecoin which was developed in 2019 by then 49-year-old Elon Musk and backed by his companies SpaceX as well as Tesla Motorsports Inc., located in the Bay Area. Both companies are also named defendants in the proposed class action against Elon Musk filed out in New York City for operating what’s being called “a pyramid scheme.” The complaint claims that since 2019 when Musk began buying, developing, promoting, supporting, and operating Dogecoin more than ever before, proposed class members have lost nearly $86 billion with no chance of recovery.
The ridiculous size of the class action against Elon Musk claims that he, Tesla, and SpaceX have falsely promoted Dogecoin as an investment when it actually has no value. They take advantage of his position as one of the wealthiest people in order to manipulate this asset for profit, exposure, or amusement.
“Dogecoin is not a currency, stock, or security. It’s not backed by gold, other precious metal, or anything at all. You can’t eat it, grow it, or wear it. Dogecoin does not generate cash flow. It doesn’t pay interest or a dividend. It has no unique utility compared to other cryptocurrencies. It is not part of a new internet or the metaverse. It is not based upon anything of value. It’s not secured by a government or private entity.”
The lawsuit contends that the overall value of Dogecoin is derived from a “greater fool” willing to pay more for it in hopes that the price will rise indefinitely, and as long as there are people who believe this will happen, they can make money off those hopes.
Elon Musk has been able to use Twitter and other social media sites as a means of manipulating the price of Dogecoin without any consequences. The filing claims that this is partly due to the fact cryptocurrency isn’t regulated by the U.S Securities & Exchange Commission (SEC).
“Defendants have knowingly launched a scheme known as ‘the Dogecoin crypto pyramid scheme’ which has ensnared millions of people around the world in an Ethereum-based investment fraud,” according to court documents filed by the Department of Justice. The suit singles out Musk who promoted and supported this fundraising campaign for their involvement with what it claims is “deceptive advertising” designed to profit off those looking forward to making money through investments without fully understanding how difficult or risky they might be if things go wrong.
The complaint quotes the former value of Dogecoin at $93 billion, thanks in part to Musk’s deployment and support from certain corporations as well influencers, billionaires, etc. The asset’s total value at the time of the filing is estimated to be under $7 billion.
The plaintiff, who first purchased Dogecoin in April 2021 when the crypto’s value was $0.30 per coin, demands 86 billion dollars worth of compensatory damages as well as $172 billion in treble damages. The lawsuit against Elon Musk, one of the biggest class actions in history, aims to stop him and his companies from engaging in illegal wire fraud, illegal gambling, negligence, and false advertising. It also seeks damages for unjust enrichment.
Dogecoin investors filed the class action against Elon Musk in hopes of recovering some of the money they lost since 2019
The lawsuit claims that Billy Markus, a California man with connections to the cryptocurrency community, along with Jackson Palmer launched Dogecoin in 2013 at $0.0002 per coin, have admitted it was nothing more than a joke and also admitted the asset relied heavily on “greater fool theory,” meaning there would always be someone willing to buy off any coins if they believed it would someday increase in price. The case states at the end of 2013 the market cap was “only 3.71 million.”
In 2019, Elon Musk began talking to developers of the popular cryptocurrency Dogecoin. The lawsuit claims that in this time period he provided advice and shared his vast Rolodex of contacts which has helped shape his success as an emerging market leader within cryptocurrencies today; however, it appears not everyone is pleased with these actions. It alleges Musk has used his power and position as president of Tesla and SpaceX to attract the support of celebrities, the ultra-rich, and trending influencers, along with legions of social media followers, to boast about the price, trading volume, and market cap of Dogecoin.
It has been alleged that Musk, a Twitter user so prolific that he is currently in the process of buying up Twitter, knew full well his posts were affecting Dogecoin’s overall value. The complaint says this rise continued through 2019 and into 2020.
“Defendant Musk is and has been fully aware that his tweets regarding Dogecoin had direct effects on the Dogecoin price, market cap, and trading volume,” the lawsuit says.
The lawsuit is not the first class action against Elon Musk, who also faces one proposed by Twitter shareholders
Over the course of his 2021 appearance as host on Saturday Night Live, Elon said a number of things that directly impacted Dogecoin. He claimed it’s “the future of currency” and then agrees with what we all know – this coin was just “a hustled.” The class action against Elon Musk disputes these comments because they believe they “negatively reflect” the coin, therefore making its trading volume skyrocket while the price plummeted.
“Within four days, the Dogecoin market cap dropped from $95 billion to $45 billion (nearly 50%) and the price dropped from $0.73 to $0.38,” the case reads, noting that this dip was short-lived thanks to subsequent encouraging tweets from Musk.
The court document goes into great detail about every tweet Musk made since 2019, which may be related to the downfall of the coin, but it’s not until June 2022 that the plaintiff claims that he lost 70% of his investment, when selling at a price of $0.08 per coin.
“Since Dogecoin peaked in May 2021, it has dropped to as little as $0.052, down 92% from its all-time high,” the suit follows, alleging broadly that over the last three years, Musk and his companies have manipulated the price of Dogecoin “on behalf of themselves individually, as well as family members, friends, employees, and followers.”
But How Is Dogecoin A Pyramid Scheme, Exactly?
The suit cites New York Attorney General Letitia James in defining a pyramid scheme as essentially “a fraudulent system of making money based on recruiting an ever-increasing number of people to invest.”
Intrinsically, Dogecoin has no value. The only thing that makes this currency worth something is the people who believe in its potential to rise higher than gold or USD; otherwise, it would just be another cryptocurrency with an unlimited amount of supply and nothing productive behind its existence at all.
“Defendants knew, or with the exercise of reasonable care, should have known that Dogecoin is a pyramid/[P]onzi scheme,” the suit alleges.
Who Does The Lawsuit Look To Cover? I Own Some Dogecoin, So What’s Next?
This class action against Elon Musk is brought on behalf of all those who have lost money since at least April 2019 because they wanted in or thought it would be a good idea to invest.
When a class action lawsuit is filed, there’s usually nothing you need to do at first. It can only happen if and when the case settles (not guaranteed!). This typically involves filling out an online form or sending in your paperwork by mail with instructions on how much money you want to be awarded for damages incurred as part of this litigation process.
You may receive a notice by mail or email in the event of an upcoming settlement. The information will probably contain how to file your claim, legal rights for each type of incident it covers (e g accidents), any proof needed at filing time like photographs or multimedia, etc., as well details on what class members can expect from this process overall – including when they should be ready with their evidence.
Class actions can take many months or even years to work through the legal process and reach either settlement, dismissal, or arbitration.