Elon Musk and Tesla Drop Lawsuit Against Investors Who Accused Them of Dogecoin Pyramid Scheme

Crypto investors who appealed the Aug 29 dismissal of the case against Elon Musk for fraud and insider trading are taking the lawsuit back.

Crypto investors who appealed against billionaire Elon Musk in a fraud and insider trading class action lawsuit over Dogecoin are withdrawing their appeal and dropping sanctions against Musk’s lawyers.

The investors, who had accused Tesla's CEO of fraudulently interfering in the case, are also agreeing to withdraw their Aug. 29 dismissal of the case. Musk and Tesla, in turn, are dropping their request to sanction the investors' lawyers for pushing a “frivolous” case. They had accused the investors' lawyers of constantly changing their legal arguments and pressuring Musk and his company to settle the case for money.

The agreement to dismiss the appeal and both parties' motions was filed in Manhattan federal court on Thursday night. It still needs to be approved by U.S. District Judge Alvin Hellerstein.

Accusations of market manipulation

The original lawsuit sought $255 billion in damages, alleging that Musk manipulated Dogecoin's price through his tweets and interviews. The investors claimed that Musk and Tesla engaged in a “crypto pyramid scheme” by promoting Dogecoin and manipulating its value. They pointed to Musk's 2021 appearance on Saturday Night Live, where he called himself "The Dogefather," and his numerous tweets about Dogecoin as evidence of market manipulation.

“Defendant Musk is the self-appointed ‘Dogefather,’ ‘former CEO of Dogecoin,’ …… who assembled the ‘Doge Army’ ….to increase the price, market cap and trading volume of Dogecoin.”

Plaintiff Keith Johnson

The investors further alleged that Musk's statements, such as Dogecoin could be the ‘currency of Earth,’ influenced the market, leading to fluctuations in the memecoin's price.

In the original lawsuit, the investors alleged that Musk's tweets were false and misleading and that Dogecoin's price was being manipulated. Musk's lawyers said the allegations were baseless and that there was nothing illegal about supporting or joking about a decentralized cryptocurrency. They filed a motion to dismiss the case in April 2023, calling the lawsuit "a work of fiction."

However, on Aug. 29, Judge Hellerstein dismissed the case, ruling that it had no legal standing. The withdrawal of the case marks the end of a contentious legal battle.

Dogecoin is among the top cryptocurrencies, with a market capitalization of $52 billion. At the time of writing, it was trading at $0.357, up 84% over the past week and 183% in the last month. However, the coin is still significantly down from its all-time high of $0.731, set on May 08, 2021.