The $258 billion extortion suit accusing Elon Musk of running a pyramid scheme to back cryptocurrency Dogecoin has expanded, with seven new investor claimants and six new defendants, including his tunneling company Boring Co. According to an amended lawsuit filed Tuesday in Manhattan federal court that Musk, his electric car company Tesla Inc (TSLA.O), space tourism company SpaceX, Boring and others deliberately pushed up the price of Dogecoin by more than 36,000% in two years. and then let it crumble. In doing so, the defendants benefited from tens of billions of dollars at the expense of other investors in Dogecoin, despite knowing all along that the currency lacked intrinsic value and that its value depended solely on marketing, the indictment said.
Created in 2013 by software engineers Billy Markus and Jackson Palmer, Dogecoin was an ironic response to the year’s two internet phenomena: cryptocurrencies, which proliferated in the wake of bitcoin, and montages of a photo of a Shiba Inu dog. the Internet. The price of dogecoin has fluctuated by less than a cent for most of its history. But it has gone from a shadowy room to one of the most talked about digital assets between 2020 and 2021.
Tesla CEO Elon Musk may have played an important role in the rise of dogecoin. Musk has tweeted periodically about cryptocurrency, and these tweets are often followed by dogecoin price hikes. Musk tweeted the image below on April 15, 2021, and just after that, the price of dogecoin tripled.
Musk has indicated that dogecoin is his favorite cryptocurrency. In February 2021, he named it The People’s Crypto, which has allegedly helped drive the price up.
In May, Musk was a guest on the Saturday Night Live (SNL) TV show, an opportunity for the billionaire to discuss topics such as dogecoin, Tesla, as well as SpaceX. In a skit during SNL, Musk played the role of a cryptocurrency expert who wore a bow tie on the Weekend Update segment of the show.
When asked what dogecoin is, Musk replied: It is the future of money. It is an unstoppable financial vehicle that will take over the world. When a member of the show’s crew, Michael Che, replied: So it’s a scam? Musk replied, “Yeah, it’s a scam,” and laughed. This was undoubtedly a billionaire joke, as the unconventional CEO posted numerous comments about cryptocurrencies on Twitter and regularly criticized cash for negative real interest rates.
That said, the joke resulted in the cost of dogecoin dropping by about 12%.
An investor filed a complaint, soon joined by other complainants. Allegations extend to other legal entities
Keith Johnson describes himself as a US citizen who has been ripped off by a dogecoin pyramid scheme set up by the accused. He asks that his complaint, filed in a New York court, be classed as a class action on behalf of investors who have suffered losses from betting on dogecoin since 2019.
The defendants knew since 2019 that Dogecoin had no value, but promoted Dogecoin to take advantage of its exchanges, the indictment states. Musk used his pedestal as the richest man in the world to exploit and manipulate the Dogecoin pyramid scheme for profit, fame and entertainment.
The complaint also consolidates comments from Warren Buffett, Bill Gates and others who question the value of cryptocurrency.
Johnson is demanding $86 billion in damages, which corresponds to the decline in Dogecoin’s market value since May 2021, and wants that amount to be tripled.
It also includes two companies run by the entrepreneur: Tesla, the electric vehicle manufacturer, for accepting dogecoin as payment for certain derivative products, and space company SpaceX for naming one of its satellites after dogecoin.
Indeed, Elon Musk announced in December 2021 that we could buy Tesla vehicles in Dogecoin. A month later, thanks to DOGE, you could actually buy an electric kids quad from Tesla. Or even a belt buckle, whistle and other small merchandising items. On May 27, 2022, Elon Musk handed it over with his space company; he announced on his Twitter account that the SpaceX store would soon also be open for payments in Dogecoin, stating: Tesla merchandising products can be purchased with DOGE, and SpaceX will soon be too.
Besides, he went further. When asked if we can pay subscriptions to his Starlink satellite internet network in Dogecoin, Elon Musk answers (almost) in the affirmative: maybe someday
Keith Johnson equates dogecoin with a pyramid scheme in that the virtual currency, according to the complaint, has no intrinsic value, produces nothing, is not based on physical assets and the number of coins in circulation is unlimited.
He also wants to prevent Musk and his companies from promoting Dogecoin and would like a judge to rule that trading Dogecoin is gambling under federal and New York law.
The complaint said that Dogecoin’s liquidation began around the time Musk hosted NBC’s “Saturday Night Live” and called Dogecoin a scam while playing a fictional financial expert in a “Weekend Update” segment.
The lawsuit added several new plaintiffs, as well as Elon Musk’s Boring Company and the Dogecoin Foundation, the nonprofit behind the token itself, among the new defendants.
A crypto winter?
Dogecoin’s bearish situation is far from the only one. The cryptocurrency world is struggling, with prices dropping to levels not seen since late 2020. The decline is likely due to several factors, including general economic uncertainty in the stock market, inflation, panic caused by the massive sale of whales, etc.
It certainly didn’t help the cryptocurrency industry when London-based crypto bank Celsius Network announced a freeze on withdrawals, exchanges and transfers between accounts on Sunday night.
In the hours following this announcement, the values of other cryptocurrencies also fell: Bitcoin fell by 10%, Ethereum lost 19% of its value and Dogecoin lost almost 15% of its value, or about $0.01. As a whole, the overall cryptocurrency market hovered below the token mark of $1 trillion, compared to $3 trillion last November.
Cryptobanks like Celsius are modeled after traditional banks. They pool deposits of cryptocurrencies such as bitcoin and offer loans and interest, often over 10%, to savers. The problem is that these new players are not regulated and nothing protects the depositors’ money. In addition, unlike traditional financial institutions, they are not subject to a minimum capital threshold in their reserves.
The cryptocurrency crash is part of a larger market crash. The S&P 500 stock index fell nearly 4% Monday on fears of a faster hike in interest rates by the Federal Reserve. High interest rates are putting downward pressure on all assets, including stocks and cryptocurrencies.
What do you think of this complaint? Do you think it has any chance of success?
Do the claims seem legit to you?
What do you think of the $258 billion in damages, which is three times the estimated decline in Dogecoin’s market value since May 2021? Reasonable, crazy or something else? Why ?