Crypto investor sues Elon Musk for $ 258 billion, claiming Dogecoin “pyramid scheme”

Cryptocurrency investor is suing Elon Musk for $ 258 billion based on what the plaintiff calls a “pyramid scheme” to artificially inflate the value of Dogecoin. Keith Johnson of New York calls himself a crypto investor and says the world’s most successful entrepreneurs are “fake and deceptive.” [claimed] that Dogecoin is a legitimate investment when it has no value. Fromm The hill:

According to the lawsuit, “after defending Musk and his corporations Space X and Tesla, Inc. began buying, developing, investing, promoting, maintaining and operating Dogecoin in 2019, the plaintiff and class lost approximately $ 86 billion in what he calls a “crypto pyramid scheme.”

Apparently, Johnson uses a “crypto” definition of a “pyramid scheme,” because while Johnson may have a legitimate reason to act against Musk, the claim is not a traditional pyramid scheme. The classic pyramid scheme involves a man who behaves like a brilliant financial advisor and uses an ever-increasing number of investors to pay off the initial investors who continue to talk about their success in using the intriguer.

At least this lawyer does not see any pyramid scheme in this situation.

This does not mean that Musk is clear or that this is not a serious case. Depending on Musk’s behind-the-scenes actions and evidence of his motives, Musk may be responsible for what investors traditionally call “pumping and dumping.” Pumping and dumping involves using someone (or being someone) with a bulging platform to “pump up” a security or position without justification, in addition to increasing the value of the underlying investment. Meanwhile, the “pump” discards (sells out) its initial position before legitimate information reaches the public, and the value begins to fall.

One can be held responsible for using one’s position to defraud investors. Managers of publicly traded corporations must follow SEC rules when selling shares. Musk could be held liable if Johnson can prove that Musk intended to use his position to “play” with Dogecoin to make money, selling it all the time as the value of the coin increased.

According to The Hill:

The lawsuit also details Musk’s tweets and videos about Dogecoin over the years. The lawsuit highlights how Musk called himself “DogeFather” while advertising his appearance on NBC’s “Saturday Night Live” in April 2021.

The suit fits the “pump” part of the traditional cause of action. Eventually, Dogecoin began as a joke by its creators, software engineers Billy Marcus and Jackson Palmer, mocking the crypto market. Doge was, in fact, a play on words, a vague reference to Dog, according to him Wiki.

The success of the lawsuit will depend on whether the plaintiff has or can obtain evidence that Musk knew the creators and / or whether Musk knew the reason they created Dogecoin, whether Musk believed the currency had real potential, and whether Musk he believes that his reputation as a visionary would position him to “inflate” value. And, as has been said, the case will include whether Musk sold his position while continuing tweets and sponsorships. If Musk loses everything he had in Dogecoin, it’s almost impossible to prove the damage.

Given how much Musk promotes the currency, Musk has significant exposure depending on his intentions and actions. This is a serious case, although the damage claimed seems absurd. But the damage is based on the value lost in the currency, estimated at $ 86 billion, based on the currency’s highest value of 74 cents in May 2021, to its current value of 5.8 cents. Johnson adds the traditional threefold damage (three times the actual damage) as criminal, fraudulent, deliberately extracting people’s money.

Against all this is the collapse of all cryptocurrencies. Johnson will have to establish that Elon played a special role in the rise of Dogecoin and sold a significant position before the entire cryptocurrency collapsed. It won’t be easy, but there’s a chance Johnson will thread the needle. He will not be able to determine the value of the entire collapse on Musk. And Johnson can only claim his own damages unless he finds out “Class action”, representing anyone who has lost value based on Musk’s actions. But if Johnson even finds a 20% artificial discount for all Dogecoin investors, Musk will suffer a significant blow.

Elon has been behaving more and more recklessly over the last six months and has received many significant blows. The success of the case will depend on whether Musk’s recklessness goes even further.

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