As the SEC Tightens Its Noose Around Kim Kardashian on Crypto Disclosure Delinquencies, Is Elon Musk Next on Dogecoin?

Rohail Saleem
Elon Musk Dogecoin
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This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.

As the entire financial world is watching the explosion in Credit Suisse’s CDS rates with angst, bringing back memories of Bear Stearns’ failure back in 2008, the SEC just charged Kim Kardashian for failing to disclose the incentives offered to promote a crypto asset, leading to Elon Musk’s detractors calling for similar charges to be leveled against him for allegedly precipitating Dogecoin’s (DOGE) pump-and-dump.

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To wit, the SEC has now charged Kim Kardashian for failing to disclose a payment of $250,000 in order to promote the EthereumMax (EMAX) token on social media. Additionally, Kardashian has agreed to “settle the charges, pay $1.26 million in penalties, disgorgement, and interest, and cooperate with the Commission’s ongoing investigation.” Today’s development has, however, energized Elon Musk’s detractors, who claim that the CEO of Tesla has continued to run a pump-and-dump scheme vis-à-vis Dogecoin.

Regardless of the optics around Elon Musk’s relentless promotion of Dogecoin, readers should note that the CEO of Tesla has likely dotted all of the proverbial i’s from a legal viewpoint and, as such, remains quite resistant to charges of wrongdoing.

First, unlike Kim Kardashian’s inorganic endorsement of EthereumMax, Elon Musk did not receive any payment to promote Dogecoin. Musk’s critics allege that his promotion of Dogecoin was a pivotal factor behind the meme coin’s extraordinary rally in early 2021. After all, the CEO of Tesla employed a variety of tactics to promote Dogecoin, ranging from changing his Twitter profile picture to one that showcased a DOGE-related meme to tweeting DOGE-supporting policies such as Tesla’s acceptance of the meme coin as a valid payment method for merchandise on its official website. Elon Musk even exhorted McDonald’s to start accepting Dogecoin, offering the inducement to consume a Happy Meal on live TV. Dogecoin had formed a new all-time high in the runup to Musk’s Saturday Night Live appearance, only to tank thereafter when Musk termed the cryptocurrency a “hustle”. Prima facie, these developments paint a worrying picture. However, Musk’s detractors fail to account for one critical point: Tesla still holds all of its Dogecoin stash.

While announcing its earnings for Q2 2022, Tesla revealed that it had disposed of 75 percent of its Bitcoin holdings. However, during the ensuing earnings call, Elon Musk clarified that the company still held on to all of its Dogecoin stash. With the “dump” element missing in pump-and-dump allegations against Musk, it is hard to prove any material wrongdoing. Of course, it remains to be seen whether the CEO of Tesla disposed of some Dogecoin tokens from his personal stash. This determination will likely warrant a formal investigation by the SEC. The bar for such an investigation, however, remains high given the utter confusion that currently reigns over whether a particular crypto asset constitutes a commodity or a security.

Of course, Elon Musk also faces a multi-billion-dollar lawsuit by Dogecoin investors for allegedly running a “pyramid scheme”. Here too, since the CEO of Tesla did not promise any consideration – whether explicitly or via promises of future returns – to new Dogecoin investors, all of whom jumped in to take advantage of the cryptocurrency’s rally on the premise that Musk’s star power was sufficient to overcome Dogecoin’s inherent flaws, it is difficult to prove any wrongdoing.

In short, Elon Musk is unlikely to face any punitive measures from the SEC on account of Dogecoin’s price pump, barring an explosive development such as the scenario where Elon Musk is found to have maintained a personal, undisclosed stash of Dogecoin which was stealthily disposed of, coupled with the determination by the SEC that Dogecoin constitutes a security. Does this scenario fall within the realm of possibility? Certainly. Is this likely? That's up in the air.

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