Is Dogecoin a pyramid scheme? What we know so far as Elon Musk faces $258B lawsuit

Elon Musk has been sued for $258 billion in a lawsuit filed in New York on Thursday. The plaintiff, Keith Johnson, has also included Musk’s companies Tesla and SpaceX, for which the world’s richest person is the CEO.

What does the plaintiff say about Musk and Dogecoin?

The lawsuit claims the defendant and his companies have engaged in a “crypto pyramid scheme” – aka a Ponzi scheme – and have used Dogecoin to defraud him and other investors.

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Johnson’s claim also notes that Musk and his companies’ activities in relation to the cryptocurrency have been designed to inflate Dogecoin’s price. In this case, he accuses Musk of hurting investors through “false and misleading” tweets and announcements.

Notably, Elon Musk has been one of Dogecoin’s most high-profile supporter, a “Dogefather” and “former CEO of Dogecoin” part of the long list of titles he tweeted.

In a comment on the lawsuit, Dogecoin creator Billy Markus simply noted: 

How much does the class claim to have lost?

The lawsuit claims that Musk’s promotion of the Dogecoin was for “profit, exposure and amusement,” but he continued despite knowing that the cryptocurrency had no value.

By encouraging investment in the token, the Tesla CEO allegedly helped push the total crypto market cap to $3 trillion and Dogecoin to over $93 billion. At various points, Musk’s tweets saw the DOGE price jump (or decline) in what the plaintiffs say is a “pump and dump” scheme that ended with them losing $86 billion. 

The suit therefore claims $86 billion for compensation and $172 billion in punitive damages from Musk and his companies.

The class is “defined as all individuals or entities who have lost money buying, selling and/or trading Dogecoin since at least April 2019.”

Price of Dogecoin

Billy Markus and Australian Jackson Palmer created Dogecoin in December 2013, based on the Litecoin code and touting the “doge” internet meme. Its popularity has skyrocketed over the past three years, spawning several other meme coins sporting the Shiba Inu dog image.

Dogecoin, currently ranked 11^th among the largest cryptocurrencies by market cap at over $7.2 billion. The current value of the DOGE token is 0.56 cents, a price level that’s over 92% off its all-time high at 73 cents reached in 2021. 

As such, the DOGE at $1 price level remains an elusive milestone.