Entrepreneur Elon Musk is facing new allegations of illegal insider trading, accused of manipulating the price of Dogecoin for personal benefit. The allegations come as part of an amendment to a lawsuit filed in June 2022, where plaintiffs allege that Musk used his ownership of Twitter and his significant online presence to entice buyers, creating a favorable market for him to sell $124 million worth of Dogecoin.
The Accusations:
The plaintiffs claim Musk committed fraud by using a strategy they label as “carnival barking,” aimed at increasing his wealth at the expense of retail investors. They argue that Musk exploited his followers’ lack of business and investment acumen, manipulating them for his benefit. The plaintiffs assert that Musk’s prolific use of Twitter was a major factor in inflating the price of Dogecoin, resulting in a temporary 36,000% increase.
Supporting Evidence:
To back their claim, the plaintiffs point to a temporary change in Twitter’s logo from April 3 to April 6. During this time, Twitter’s familiar blue bird logo was replaced with the Shiba Inu, the symbol of Dogecoin. This change was perceived by some as an indication that Musk may favor Dogecoin over other cryptocurrencies, potentially increasing Dogecoin’s demand, and transitioning it from a meme token to a utility token.
Limited Merchant Acceptance and Price Increase:
The article also emphasizes the limited number of merchants accepting Dogecoin as a form of payment. This lack of outlets for spending Dogecoin has contributed to a surge in its price, with the cryptocurrency seeing a significant 30% increase during the mentioned period. It is alleged that two wallets linked to Musk sold a total of 1.4 billion Dogecoins between April 4 and April 6, amounting to $124 million.
Potential Legal Implications:
Presiding judge Alvin Hellerstein has indicated that he is likely to permit the claim to be amended, suggesting that the insider trading allegations against Musk may progress in court. However, Musk’s lawyer, Alex Spiro, declined to comment on the matter. Musk’s legal team has previously pushed for the lawsuit’s dismissal, arguing that tweeting words of encouragement does not equate to fraud.
Musk’s Influence and Dogecoin’s Value:
The article recognizes Musk’s substantial influence on Dogecoin’s value, which is currently the eighth-largest cryptocurrency by value at over $10 billion but was valued nine times higher in early May 2021. The claim argues that without Musk’s continuous promotion, Dogecoin’s value would be negligible.
Challenges Ahead:
The plaintiffs may face difficulty proving their claim that Musk targeted vulnerable groups. The article notes that Musk’s actions, like tweeting a picture of his dog at Twitter headquarters, can cause speculators to invest in canine-based meme tokens. While the claim asserts Musk’s ability to manipulate Dogecoin’s price, it underlines that others retain the choice to trade with him.