The Reason Elon Musk Is Facing A $258 Billion Lawsuit
Elon Musk is currently being sued for more than he is worth after being accused of running a "pyramid scheme." A lawsuit claiming damages of $258 billion was filed against the world's richest man in Manhattan on June 16. Musk's current net worth, according to Forbes' "real-time billionaires" list, is $212.5 billion.
The billionaire's wealth is mostly tied up in Tesla stock and tends to fluctuate with the value of the company. Forbes says Musk owns around a quarter of Tesla and 9.1% of Twitter. Musk also has the $125 billion spacecraft and satellite manufacturing company SpaceX in his portfolio, among other interests. The website also notes that a significant amount of Musk's Tesla stock is being used as collateral for loans and a deduction has been made to account for that.
Musk's first significant contribution to the tech world was the co-founding of PayPal. After playing a significant part in the payment service's success, the South African entrepreneur cashed out and focused his efforts on Tesla, which is now the world's biggest electric vehicle manufacturer. Alongside PayPal, Tesla, and SpaceX, the litany of companies Musk has been involved with includes The Boring Company and Neuralink.
The billionaire has also developed a reputation for pushing outlandish solutions to far-out problems — including in 2015 when he suggested using nuclear weapons to make Mars habitable. Musk has also heavily embraced cryptocurrencies, which may have landed him in trouble.
Musk's embrace of cryptocurrency
Cryptocurrency is one of the areas where Musk has heavily inserted himself. Under Musk, Tesla became one of the first major companies to accept cryptocurrency as a form of payment. Uniquely, Tesla didn't just stop at accepting Bitcoin, which is the most famous and arguably most desirable cryptocurrency, but it also accepts payments for certain items in the meme-based cryptocurrency Dogecoin.
Musk also has a strong track record of tweeting about cryptocurrency, which seems to have caused huge fluctuations in the price of various coins. The most extreme example of this is, again, Dogecoin, which has been valued at a fraction of a cent for the majority of its history. Dogecoin's low value is mainly related to the fact there is no hard cap on the amount of Dogecoins in existence, but the fact that it is based on a popular meme does its credibility no favors. Despite its disadvantages, Musk's continuous tweeting about the currency and promises to literally take it "to the moon" resulted in Dogecoin reaching an all-time high of 64 cents per coin in May 2021. It has now collapsed back below a cent per coin, and one individual is placing the blame for the whole thing firmly at Musk's door.
The world's richest man and his $258 billion problem
Reuters reports that a $258 billion lawsuit was filed against Musk at Manhattan's federal court on June 16, 2022. The man filing the lawsuit, Keith Johnson, claims Musk pumped up the price of Dogecoin before letting the value of the cryptocurrency plummet. In the complaint, Johnson alleges that Musk used his fame, following, and platform as the "world's richest man" to "operate and manipulate the Dogecoin Pyramid Scheme for profit, exposure, and amusement." Johnson also alleges that Musk "promoted Dogecoin to profit from its trading," despite knowing the cryptocurrency had "no value."
To back up his allegations, the complainant has also included quotes casting doubts on the viability of cryptocurrency from some of the other richest men in the world, including Warren Buffett and Bill Gates. The lawsuit is seeking three times the amount Dogecoin has declined in value since May 2021. Johnson also wants the trading of Dogecoin to be seen as gambling under both federal and New York law. Musk has yet to comment on the lawsuit.
Despite the accusations, Musk's actions do not seem to fit the definition of a "pyramid scheme," which Investopedia describes as: "an illegal investment scam based on a hierarchical setup of network marketing." A pyramid scheme essentially involves the person at the top of the pyramid convincing two people to pay into the scheme, who then each recruit two more people who also pay in. The recruiting process continues, and money flows up the "pyramid" until the bottom levels of the "pyramid" eventually get too large and the latecomers lose their investments.
This isn't the first time the billionaire has been sued
This isn't the first time the Tesla founder's financial and Twitter activities have landed him in court. In 2019, he was sued by one of the divers who helped rescue a group of children trapped in a cave in Thailand. Vernon Unsworth, who made disparaging remarks relating to a submarine Musk sent to the scene of the rescue, was referred to as "pedo guy" on Twitter by the billionaire. This resulted in a $190 million defamation lawsuit that Musk ultimately won (via BBC).
Musk has also found himself in hot water with the US Government, having previously been sued by the Securities and Exchange Commission and probed by the Department of Justice over tweets he made regarding the potential sale of Tesla stock, and the possibility of taking the company private.
Most recently, Musk has found himself in court because of issues surrounding his proposed purchase of social media platform Twitter. Shareholders have filed a lawsuit claiming Musk violated securities laws by not declaring his stock purchase in time. The law in question states an individual has ten days to declare their investment if they purchase more than 5% of a company. Musk owned more than 5% of Twitter by March 14, but did not declare his purchase to the SEC until April 4 — by which time he owned over 9% of the platform.