In a third amended complaint, plaintiffs in a class action lawsuit against Tesla CEO and Twitter owner Elon Musk are making fresh allegations centered around dogecoin (DOGE) and insider trading. Among them: That Elon Musk himself “manipulated the market of Bitcoin.”
In the complaint, which was filed on Wednesday, the plaintiffs allege that “Dogecoin is a domestic security subject to the Court’s jurisdiction under the Exchange Act.” The SEC has not alleged that dogecoin is a security.
Second, the new allegations “plausibly allege” that Musk “also manipulated the market for Bitcoin while Tesla was trading that cryptocurrency.”
The third complaint names Musk and Tesla as defendants, and dropped the Dogecoin Foundation.
Here’s a look at the new allegations:
- Securities fraud: If not for Musk’s “material misstatements and omissions, Plaintiffs and the Class would not have purchased Dogecoin.” Plaintiffs also claim that this manipulation is supported by Musk’s “market manipulation of Bitcoin.”
- Insider trading: Musk and Tesla artificially inflated the price of dogecoin to profit from it.
- Common law fraud: Musk “knowingly and recklessly made material misrepresentations” to dogecoin investors.
- Unjustly enriched: Plaintiffs argue that Musk and Tesla were “unjustly enriched by billion of dollars” due to “undisclosed sales of dogecoin based on insider information.”
“The proposed amendments would not be futile because they provide further detailed factual allegations concerning Plaintiffs’ claim that Defendant Elon Musk has been manipulating the cryptocurrency market and that together with his company, Tesla, Inc., he insider traded on foreknowledge of his market manipulative moves,” lawyers wrote in the most recent complaint.
Back in February 2021, Tesla purchased $1.5 billion in bitcoin and announced that it would be accepting payments in BTC. However, in May, Musk announced that Tesla would not accept bitcoin for purchases and cited environmental concerns.
The complaint also alleges that Musk “took extensive responsibility for the Dogecoin enterprise as a whole, thus giving rise to the fiduciary relationship required to state a claim for insider trading.”
Though it’s not clear exactly how Musk took “responsibility” for dogecoin, the filings cited “Dogecoin enthusiasts’ choice of Musk (from among four candidates) as ‘CEO’ was accepted by Musk.”
“The @dogecoin account then ‘quote retweeted’ Musk’s tweet with the remark, ‘It looks like you’re the CEO now, @elonmusk, DM [i.e., ‘direct message’] us where to email the access codes :-D’ and Musk replied, ‘Uh oh.’ Later that day, Musk tweeted a Dogecoin-themed meme,” the filing said.
Plaintiffs had previously claimed that dogecoin counts as a security under the Howey test in the second amended complaint, which Musk’s legal team petitioned to dismiss back in March. The complaint alleged that Musk claiming that SpaceX would send Dogecoin “to the moon” in 2022 — which did not happen — was “deceptive” because it cannot be sent to the moon.
Musk’s lawyers claimed that Musk did not break any laws by tweeting “funny pictures about a legitimate cryptocurrency.”
On April 3 — days after Musk’s legal team asked the court to dismiss the second amended complaint — Musk changed the Twitter logo to the Doge logo. The complaint claims that the logo change happened in 2022, but it actually happened in 2023.
According to the newest complaint, the price of dogecoin spiked 30% and promptly fell when Twitter replaced the logo with the blue bird.
The lawsuit was first filed in June 2022 following Musk’s infamous Saturday Night Live appearance. At the time, the plaintiffs made a series of allegations against Musk and Tesla, including that Musk is a “partner in the Dogecoin Crypto Pyramid Scheme.”
It cited his tweets and comments about dogecoin going back to 2019, and claimed that the defendants had committed wire fraud, gambling, negligence and deceptive practices.
“Plaintiffs motion for leave to file that complaint is likely to be granted, since there is not likely to be any prejudice against the Tesla Defendants, and leave to file an amended complaint is freely to be granted,” Judge Alvin Hellerstein wrote in a document released on Wednesday.
According to a memo filed on Wednesday, the defendants have until June 14, 2023 to file an opposition to the amended complaint.
The lawsuit originally sought $258 billion. The fully-diluted market cap of dogecoin is about $10 billion.
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Plaintiffs in Dogecoin Lawsuit Against Musk Make Wild New Allegations is written by Katherine Ross for blockworks.co