Last week, Elon Musk’s Tesla successfully defended against a federal lawsuit accusing them of defrauding investors by inflating the value of the cryptocurrency dogecoin (DOGE) and engaging in insider trading, resulting in billions of dollars in losses.
The lawsuit, filed by investors, alleged that Musk, the owner of X (formerly Twitter), used the platform, his 2021 appearance on NBC’s “Saturday Night Live,” and other promotional activities to trade dogecoin profitably at the investors’ expense. The investors claimed that Musk and Tesla controlled several dogecoin wallets and manipulated the cryptocurrency’s market.
According to the lawsuit, Musk deliberately drove up dogecoin’s price by more than 36,000% over two years before allowing it to crash. The investors argued that Musk and Tesla timed their trades to coincide with Musk’s public statements and activities related to dogecoin. They highlighted an instance in April 2023 when Musk replaced Twitter’s blue bird logo with the dogecoin Shiba Inu dog logo, leading to a 30% increase in dogecoin’s price before Musk sold off his holdings.
However, U.S. District Judge Alvin Hellerstein ruled that Musk’s tweets, including those promoting dogecoin as the future currency of Earth or suggesting it could be used to buy Teslas or be launched to the moon by SpaceX, were “aspirational and puffery” rather than factual claims susceptible to falsification. The judge concluded that these statements were not actionable under securities fraud laws.
Hellerstein also found the investors’ claims of market manipulation and insider trading unclear and unsubstantiated. Consequently, he dismissed the lawsuit with prejudice, meaning the case cannot be refiled. The investors had originally sought $258 billion in damages and had amended their complaint four times over two years.
Lawyers representing the investors did not immediately respond to requests for comment. Musk’s lawyer, Alex Spiro, responded to the dismissal with a statement, saying, “It’s a very good day for dogecoin.”
In their argument for dismissal, Musk’s lawyers contended that there was nothing improper about Musk’s “innocuous and often silly tweets.” They also pointed out that there was no evidence to suggest Musk owned two wallets used for suspicious trading or that he or Tesla had sold dogecoin.
On his “Saturday Night Live” appearance, Musk had described dogecoin as a “hustle” while portraying a fictitious financial expert in a segment of “Weekend Update.”
The decision to dismiss the case was issued on Thursday night by Judge Hellerstein in Manhattan.
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