A Dogecoin investor sued Elon Musk in a class-action lawsuit for $258 billion on June 17 for allegedly running a pyramid scheme to support the cryptocurrency.
The plaintiff, Keith Johnson, accused the billionaire CEO of Tesla Inc and SpaceX in a complaint filed in U.S. District Court in Manhattan of using "his pedestal as World’s Richest man to operate and manipulate the Dogecoin Pyramid Scheme for profit, exposure, and amusement.”
The lawsuit filed on behalf of Johnson by an attorney at Even Johnson Law accuses Musk of committing racketeering fraud for over-promoting Dogecoin and then allowing the cryptocurrency to tumble after pumping up its price.
"Defendants were aware since 2019 that Dogecoin had no value yet promoted Dogecoin to profit from its trading," read the complaint, which said that the currency is an “illegal wire fraud enterprise” fueled by promotion and manipulation over Twitter.
Johnson said he is representing other investors who have lost money in Dogecoin since April 2019 and is personally seeking $86 billion in damages, representing the decline in Dogecoin's market value from May 2021 to June 2022, and is demanding another $172 billion in tripled damages and fees.
The total damages sought are more than 34 times Dogecoin’s current market cap of $7.5 billion and nearly three times its all-time high market cap of $88.68 billion in May 2021.
Dogecoin’s value has tumbled over the past year, dropping to its current value of $0.0565 per coin, from its peak of $0.74 in May 2021.
The complaint noted that the selloff began after Musk appeared in May 2021 as a guest host on NBC's Saturday Night Live, when he played a fictitious financial expert on a "Weekend Update" segment who called Dogecoin "a hustle."
“Defendant Musk is the self-appointed ‘Dogefather,’ ‘former CEO of Dogecoin,’ partner, developer, spokesperson, publicist, salesman, marketer, and promoter of Dogecoin, who assembled the ‘Doge Army’ including his corporations and various billionaires, influencers, and celebrities to increase the price, market cap and trading volume of Dogecoin," said the filing.
The Tesla CEO had been promoting Dogecoin since 2019 with a series of tweets that included “DOGE” and “Tesla merch buyable with Dogecoin,” which had increased the crypto's value.
The SEC immediately launched an investigation into Musk for that particular tweet regarding Dogecoin, and in response, the tech CEO posted on Twitter: “Doge will live forever.”
Musk announced in January 2022 that Tesla would accept Dogecoin as payment for the company’s merchandise and extended that offer in May 2022 for his space exploration company SpaceX.
The complaint also seeks that the court prohibit Musk, his companies, and any other unlicensed professionals from further advertising, marketing, or promoting Dogecoin and to declare trading in the cryptocurrency as a form of gambling under federal and New York state law.
“Since Plaintiff and the class were not advised that the trading of Dogecoin was nothing more than a gambling enterprise, Plaintiff and the class demand the return of all wagers lost trading Dogecoin.”
The class-action lawsuit also credited comments from fellow billionaires, Warren Buffett and Bill Gates, among others who questioned the value of cryptocurrency.
The case is Johnson v. Musk et al, U.S. District Court, Southern District of New York, No. 22-05037.