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Dogecoin investors suing Elon Musk demand his lawyers be tossed out for ‘dirty tactics’ [1]

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Date: 2023-06-26

A hot prop bet in Las Vegas could very well one day be, “in the end, which man will end up spending more time in court -- the former wheezing, deflating orange balloon who used to be President of the United States of America (sometimes I need to say the whole thing aloud just to control the level of bile rising in my throat), or Elon Musk.

Elon will continue seeing the insides of courtroom as his career shambles along, one suspects, and litigation currently eating up the billable hours of the best lawyers money can buy are due to our future Martian Emperor’s frequent Dogecoin antics. The Guardian summarizes here:

Elon Musk is being accused of insider trading in a proposed class action lawsuit by investors. They say the Tesla CEO manipulated the cryptocurrency Dogecoin, costing them billions of dollars. In a Wednesday night filing in Manhattan federal court, investors said Musk used Twitter posts, paid online influencers, his 2021 appearance on NBC’s Saturday Night Live and other “publicity stunts” to trade profitably at their expense through several Dogecoin wallets that he or Tesla controls. Investors said this included when Musk sold about $124m of Dogecoin in April after he replaced Twitter’s blue bird logo with Dogecoin’s shiba inu dog logo, leading to a 30% jump in Dogecoin’s price.

The $258 billion court battle accusing Elon of a racketeering scheme added a new wrinkle this week as lawyers for the plaintiffs leveled serious accusations at the lawyers for the defense, as a new report from Decrypt details:

In a filing submitted to the federal court in Manhattan, the DOGE investor lawyers called on the judge to disqualify Musk's attorneys for showing a pattern of “deprecating and oppressive misconduct” in the case. “Trials should be litigated and defended by attorneys, not by yes-men,” the plaintiffs wrote. “Tesla is a publicly traded corporation whose CEO cannot unilaterally yoke its legal defense to his own purposes.” The plaintiffs specifically point to a letter that was reported on by the New York Post on June 15 as proof of the defendants’ “dirty tactics”.

Essentially, the plaintiffs accuse Elon’s lawyers of trying to prejudice the case, and at this point we’ll need to wait to see how this gets ruled on and how it all shakes out.

But since we’re here and talking about Elon’s previous “close calls” with justice, it’s instructive to remember his tangle in court over the SolarCity acquisition by Tesla, a lawsuit he nevertheless prevailed in, as reported by Business Insider in 2022:

Six years ago Tesla bought SolarCity, the biggest installer of residential solar panels in the US. SolarCity was founded by Tesla CEO Elon Musk's cousins, and Musk sat on the boards of both companies. Angry shareholders filed a lawsuit in 2017, arguing that the takeover amounted to a bailout of SolarCity. Musk won that lawsuit on Wednesday, with the final judgment ruling that although the acquisition process was "far from perfect" Tesla paid a fair price for SolarCity. The victory meant Musk was no longer on the hook for $2 billion.

Keen eyes will note the phrase “far from perfect” in that ruling, a mild understatement as the report from Business Insider continues:

As Insider's Matthew DeBord wrote at the time, SolarCity had $3.2 billion in debt when Tesla acquired it. Its market cap had also fallen by 50% in the year leading up to the acquisition. Elon Musk argued in court he didn't think SolarCity was "financially troubled" when Tesla acquired it. However, court documents unsealed in 2019 show Musk emailed former SolarCity finance chief Brad Buss, saying SolarCity would need to solve its "liquidity crisis" to win over investors. A regulatory filing showed SolarCity had started 2016 with 15,273 staff but by the end of 2016, it had 12,243.

So obviously, Elon knew things were going great at SolarCity when he convinced his Tesla board to approve the sale. Heck, don’t we all remember that wildly successful “solar roof tile” demonstration? Business Insider here with the same article, same stone-cold reality:

Musk debuted the Solar Roof in October 2016 during a glitzy event on a house from the show "Desperate Housewives." "It needs to be beautiful, affordable and seamlessly integrated," Musk said at the unveiling event, adding: "You'll want to call your neighbors over and say, 'check out this sweet roof.'" Depositions from Tesla executives later revealed the tiles Musk had shown off at the event hadn't been operational.

While Elon got off the hook here, some said it left Tesla with “a black eye.” After all, note how much was reached in an earlier settlement.

The group of investors, which includes union pension funds and other institutional investors, argued that SolarCity was a failing enterprise that faced "likely bankruptcy" were it not for the actions of Musk and other Tesla board members, who also had large equity stakes in SolarCity. The shareholders who filed the suit had previously reached a $60 million settlement with other Tesla directors originally named in the complaint, with the payment coming from insurance. This group, which included Kimbal Musk, Elon Musk's brother, did not admit fault. … Dan Ives, analyst at Wedbush Securities, said during the course of the trial that Wall Street was watching "very closely to see the outcome for Musk and the corporate governance." The SolarCity deal has been a "black eye" for Musk and Tesla and a "clear low light" in the company's whirlwind rise, Ives said in a note late last year.

Lots of respectable people pay $60 million settlements to make problems go away. Legal observers noted at the time that this rather, uh, dubious decision could face an appeal, as described here in B2: The Business of Business.

Some attorneys and legal scholars suggest that the Delaware judge who made the ruling based his decision on twisted logic, leaving it vulnerable to be overturned on appeal. At the end of the day, both situations could end up being costly for Musk, with a $1 billion break fee if the Twitter acquisition doesn’t go through, and potentially billions of dollars still potentially on the line in the SolarCity case. If the ruling is revised, it will likely intensify criticism of Delaware’s Chancery Court, the battleground for the shareholder suit. The court has frequently come under fire for unfairly favoring corporations over shareholders. In fact, the leanings of the court and the state’s favorable corporate tax treatment are big reasons why so many companies are registered in Delaware.

Quick reminder, this is part of the reason why Tyler Durden targeted Delaware in my favorite soap-making related melodrama, Fight Club.

I can’t believe I’m saying this, but… sigh… spoilers for a movie nearly a quarter-of-a-century-old.

I feel quite old, thank you very much.

Anyway, where was I? Oh right, this case was appealed and… yeah, it died in the Delaware Supreme Court once and for all, thereby saving that great state and its even greater star the embarrassment of a rigged system exposed.

The state's highest court said that while a judge on the Delaware Court of Chancery erred in some portions of his analysis, his overall premise still supported his determination that Tesla paid a fair price for SolarCity. … The shareholders were appealing a 2022 ruling by Vice Chancellor Joseph Slights, who has since retired, that rejected shareholder claims that SolarCity was insolvent at the time of the deal.

Oh, that’s right — I must have neglected to mention the SolarCity judge who ruled in Elon’s favor in that (upheld) ruling promptly retired, ending his term six years early. Well, he did. In data terms, we file this kind of coincidence under “correlation is not causation,” and… yeah, I hope he’s enjoying his retirement. As I said, his ruling was upheld, so good job, pal. Catch some fish.

Like I always say, America’s legal system is working exactly as it’s designed.

Again, we’ll see how the court rules on the behavior of Elon’s lawyers. That said, does whatever Elon did or didn't do about SolarCity, or Dogecoin, even matter? Silly rules and regulations are for the timid or weak, as the late OceanGate founder Stockton Rush once explained:

"I think it was General MacArthur who said: 'You're remembered for the rules you break,'" Rush said, smiling.

So long as someone like Elon skirts the edges of the rules, they can continue to escape accountability as court cases pile up for quite some time. A very, very long time in some orange-tinted cases.

I mean… until there’s an inevitable implosion.

Tax Musk. Fund NASA. Get a better result.

Okay, I’m through. See you in the comments.

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[1] Url: https://www.dailykos.com/stories/2023/6/26/2177855/-Dogecoin-investors-suing-Elon-Musk-demand-his-lawyers-be-tossed-out-for-dirty-tactics

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