Allegations claim Elon Musk manipulated Dogecoin's price through orchestrated social media activity, leading to a lawsuit and accusations of insider trading.
Tesla CEO Elon Musk is facing accusations of insider trading with Dogecoin (DOGE) by a group of investors who allege that Musk traded around his social media influence.
This development follows a class action lawsuit, initially valued at $258 billion, filed by the same group in June 2022, accusing Musk and his companies of causing significant losses for Dogecoin holders.
According to an amended filing in a Manhattan federal court on May 31, the investors claim that Musk engaged in a deliberate course of market manipulation through a series of publicity stunts aimed at boosting Dogecoin's price. These stunts included public appearances and social media activity promoting Dogecoin, dating back to April 2019. As a result, Dogecoin's price surged by a staggering 36,000% to over $0.70 by May 2021, although it has since dropped significantly and currently trades 90% below that peak.
The filing challenges Musk's assertion that his promotion of Dogecoin was all in good fun and not meant to be taken seriously.
It refers to him as an "apex predator" and characterizes his millions of Twitter followers as prey. The lawsuit cites several studies that demonstrate the impact of Musk's tweets on Dogecoin's price.
Notably, his announcement of accepting Dogecoin at SpaceX in 2021 and his visit to Twitter HQ after assuming control of the company influenced the coin's value.
Furthermore, Musk reportedly changed Twitter's logo to the Doge meme's Shiba Inu image for three days, resulting in a 30% price increase for Dogecoin.
The lawsuit also claims that Musk and Tesla traded profitably based on his "intended moves," with blockchain records cited as evidence. It specifically points to a wallet address, DH5ya, allegedly belonging to Musk, which became the largest single holder of Dogecoin by February 2021 and subsequently sold millions of dollars worth of the cryptocurrency in April 2021.
The lawsuit raises the question of whether Dogecoin should be considered an unregistered security under the U.S. Securities and Exchange Commission's existing standards. While Dogecoin was founded by Billy Markus and Jackson Palmer in 2013, both have distanced themselves from the project for years.
Markus and Musk frequently engage in lighthearted banter on Twitter about cryptocurrencies.
Musk's lawyers previously dismissed the lawsuit as baseless, asserting that tweeting support or sharing amusing content about a legitimate cryptocurrency with a market cap of nearly $10 billion is not unlawful.
Elon Musk faces allegations of insider trading with Dogecoin through orchestrated publicity stunts, as investors claim he manipulated the coin's price for personal gain. The lawsuit raises concerns about Dogecoin's status as a registered security, while Musk's legal team maintains that his actions were within the bounds of the law.
The outcome of this legal battle will likely have implications for the regulation of cryptocurrencies and the responsibilities of influential figures in the industry.