Dogecoin Disaster? Lawsuit Accuses Elon Musk Of Crypto Pyramid Scheme

Elon Musk, the world's richest man, and his companies, Tesla Inc TSLA and SpaceX, are being sued for $258 billion over claims that he was involved in a Dogecoin DOGE/USD cryptocurrency scheme that inflated the coin's price and left investors with billion-dollar losses.

What Happened: The class-action lawsuit, Johnson v. Musk, 22-cv-05037, accuses Musk of running a crypto pyramid scheme — also known as a Ponzi Scheme — using the Dogecoin cryptocurrency, of which Musk has been a passionate supporter since 2019.

“It’s not backed by gold, or other precious metal, or anything at all. You can’t eat it, grow it, or wear it. Dogecoin does not generate cash flow. It doesn’t pay interest or a dividend. It has no unique utility compared to other cryptocurrencies. It is not part of a new internet or metaverse. It’s not based upon or tied to anything of value,” the introduction of the case says. 

Keith Johnson is representing a group of individuals who have lost money trading Dogecoin since April 2019, according to Bloomberg.

He's seeking $86 billion in damages, plus an additional $172 billion in damages, as well as an injunction prohibiting Musk and his firms from promoting Dogecoin and a declaration that Dogecoin trade is gambling under the U.S. and New York law.

The lawsuit alleges that “since Elon Musk and his corporations SpaceX and Tesla, Inc. began purchasing, developing, promoting, supporting, and operating Dogecoin since 2019, [the] Plaintiff and the class has lost approximately $86 billion in this Crypto Pyramid Scheme.”

Related: SpaceX Employees Say Elon Musk's Behavior Is An 'Embarrassment,' Ask Company To Take Action

Why It Matters: While the lawsuit may appear to be a "hail mary" maneuver, Musk's reputation is deteriorating. He was accused of sexual harassment last month, and employees at SpaceX penned an open letter to the company's top management on Thursday morning, urging that "SpaceX must promptly and openly divorce itself from Elon's personal brand."

TSLA Price Action: Shares of Tesla were down 7.82% to $644.36 on Thursday, according to Benzinga Pro.