A high-profile racketeering lawsuit filed against Elon Musk accusing the Tesla CEO of running a pyramid scheme involving the cryptocurrency Dogecoin has now expanded.
An amended complaint that was filed this week in a Manhattan federal court saw seven new investor plaintiffs added to the suit as well as six new defendants. The lawsuit maintains that Musk, Tesla, Musk’s space tourism company SpaceX, tunnel construction business Boring and other parties purposely drove up the price of the Dogecoin cryptocurrency by more than 36,000% across a span of two years and then allowed it to crash.
This allowed the defendants to profit to the tune of tens of billions of dollars at the expense of others who invested in the cryptocurrency. According to the complaint, this was done with the full awareness that Dogecoin lacked intrinsic value and that its value “depended solely on marketing.”
The original lawsuit for $258 billion was filed in June. That amount is three times the estimated decline in the market value of the cryptocurrency since May of last year, when its value was 74 cents; it traded at around 6 cents yesterday.
The suit alleges: “Defendants falsely and deceptively claim that Dogecoin is a legitimate investment when it has no value at all. Since Defendant Musk and his corporations SpaceX and Tesla, Inc began purchasing, developing, promoting, supporting and operating Dogecoin in 2019, Plaintiff and the class have lost approximately $86 billion in this Crypto Pyramid Scheme.”
When the lawsuit was originally filed, Musk announced he was buying even more Dogecoin in hopes of giving it a price boost. Tesla and SpaceX also allowed customers to buy merchandise from their websites using the cryptocurrency.
The suit was filed by Dogecoin investor Keith Johnson, who alleges that Musk ran a pyramid scheme by promoting the coin. The Tesla CEO is also being accused of advertising the crypto as a legitimate investment on his social media accounts in order to artificially inflate its price. In addition to monetary damages, Johnson is looking to block Musk and his businesses from future promotion of the crypto currency.
The coin saw a major rally during the first half of last year, due in no small part to frequent tweets by Musk accompanied by memes. The rally screeched to a halt after Musk appeared on Saturday Night Live and called Dogecoin a “hustle.”
The meme cryptocurrency has fallen 92.33 percent from its peak of 73 cents and is now considered one of the worst-performing altcoins despite bringing in sizeable returns for its earliest investors.
Among the new defendants are the Dogecoin Foundation, a nonprofit that offers support for the cryptocurrency.
Tesla recently sold off 75% of its Bitcoin holdings
Tesla appears to be backing away from cryptocurrency to a large extent. The company announced this summer that they had sold three quarters of their Bitcoin holdings. However, in a quarterly investor call in July, Musk said that Tesla still held Dogecoin.
“We have not sold any of our Dogecoin; we still have it,” he noted.
Although Musk has stated in the past that he personally owns Dogecoin, it was not clear whether Tesla did until Musk's comment during the investor call. However, it is not known whether they only possess it because they accept it for merchandise on their website or if they are making dedicated purchases of it.
The firm disclosed that they owned $218 million worth of digital assets after selling off Bitcoin worth $963 million. It is believed that the majority of their remaining digital assets are Bitcoin.
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