Federal Judge Dismisses Dogecoin Investors’ Lawsuit Against Elon Musk
On Thursday, August 29, 2024, New York federal judge Alvin K. Hellerstein dismissed a lawsuit filed by Dogecoin investors against Elon Musk, Tesla, and SpaceX, marking the final rejection of claims alleging market manipulation.
Judge Hellerstein’s ruling concluded that the investors’ fourth amended complaint lacked sufficient merit, dismissing it with prejudice. The judge characterized Musk’s prior statements regarding Dogecoin—such as his claims that it could become the “future currency of Earth” and that Tesla vehicles might be purchasable with the cryptocurrency—as aspirational rather than factual. He emphasized that “no reasonable investor could rely upon them,” reinforcing his view that such statements are mere “puffery.”
The lawsuit originated in June 2022 when Dogecoin buyer Keith Johnson filed a $258 billion claim, alleging that Musk and his companies engaged in a pyramid scheme that artificially inflated the value of Dogecoin, which subsequently plummeted. Johnson, who referred to Musk as the “Dogefather,” accused Musk and his companies of participating in an “illegal wire fraud enterprise,” among other charges.
In his complaint, Johnson highlighted that Dogecoin, originally created as a joke in 2013, is not backed by any tangible assets and lacks a viable business model to support its value. He described the cryptocurrency as a “fraud” that entices “greater fools” to purchase it at inflated prices.
Throughout the legal proceedings, the complaint underwent multiple amendments. In September 2022, additional investors joined the lawsuit, and by December of that year, some defendants, including SpaceX, were dropped from the case. In March 2023, Musk and Tesla filed a motion to dismiss the second amended complaint, asserting that the allegations did not identify any specific misleading statements and that Musk’s tweets about Dogecoin were merely light-hearted commentary, not violations of securities laws.
The defendants described the complaint as a “fanciful work of fiction” and contended that there is nothing illegal about expressing support for a cryptocurrency with a significant market cap.
In June 2023, the investors introduced a claim of insider trading in their third amended complaint, suggesting that new evidence indicated Musk’s activities and statements amounted to market manipulation. This led to a contentious exchange in court, where the investors sought to disqualify the law firm Quinn Emanuel Urquhart & Sullivan LLP from representing Musk and Tesla, accusing attorney Alex Spiro of misconduct. Spiro countered, calling the investors’ latest complaint frivolous and questioning the competence of their legal counsel.
Judge Hellerstein intervened in December 2023, ordering a reset of the lawsuit. He instructed the plaintiffs to refile their complaint without conflating it with press releases and denied both parties’ motions to disqualify opposing attorneys.
After the investors submitted their fourth amended complaint in January 2024, Musk and Tesla filed a motion to dismiss in March. In his latest ruling, Judge Hellerstein reiterated that the core allegations of market manipulation were not substantiated, reinforcing the dismissal of the case.
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