With the inconspicuous rise of Bitcoin and other cryptocurrencies, a plethora of queries and questions have also come to light over what possibly concerns the criminal grey area where things lie on the fine boundary of illegal actions and clever investments. These questions were further brought to light as our world's most notorious avant-garde billionaire, Elon Musk, faced two slanderous scandals where he was accused of both market manipulation and insider trading.
The complexities of the legal system and the legalities of the law not only confuse us, but also apparently Musk himself. To be frank, Market manipulation is when activities and strategies take place to influence the price of a corporation, essentially it's hiking up or down its stock price. There are many different types of market manipulation, yet the one most commonly referenced when talking about criminality in finance; is insider trading. This is when an individual trades in public tradable securities (ie. stocks and bonds) based on information which is not yet public. All types of market manipulation are very much illegal and heavily regulated by financial authorities and organisations worldwide as they undermine the integrity of the financial market and corporate sphere as well as give unfair advantages to those privy to private information.
Now, onto the main topic of this article, Elon Musk and his never-ending series of scandals. At the very start of 2023, Musk was infamously sued for a whopping 258 billion dollars by the Dogecoin investors for allegedly running what is called a pyramid scheme. Essentially, a pyramid scheme is a business model that relies on promising a future return instead of supplying investments or selling products, it is also more commonly referred to as a ponzi scheme which is slightly more "hidden" and "legitimate" looking. Musk's actions included what the lawyers referred to as 'publicity stunts'; this included news appearances, tweets and harnessing the power of influencers all in an effort to sway public opinion. Musk also changed the Twitter blue bird logo to the logo of Dogecoin; this itself led to a 30% jump in dogecoins prices. Investors say that Musk has driven up the cryptocurrency price by 36,000% over two years and then simply let it crash. Since the first surface of the suit, there have been many changes and updated versions released into the mainstream media, and it is expected that many more are to arise before this case is resolved.
However, this is not the only scandal Musk has faced with regards to cryptocurrencies. The second most notable one involves Tesla and Bitcoin. Back in February 2021, Tesla purchased $1.5 billion of bitcoin stock and later, in March 2021, it publicly confirmed it would accept bitcoin as payment for its cars. This announcement was viewed as acceptance of Bitcoin as normal legal tender, and immediately led to a 20% surge in the share price of Bitcoin. However, only 2 months later, on May 13th 2021, Musk took to Twitter to refute his previous conclusion and suspend payments of Bitcoin for Tesla cars due to the enormous energy usage it takes for computers to mine (create new) Bitcoin. This led to many accusations about whether the tech billionaire had engaged in a “pump-and-dump” scheme with the Bitcoin stock price. (This is when someone takes an action to cause the price to rise before dumping their investment at the peak, in other words, market manipulation). Yet Musk has denied these claims and instead states that Tesla waited until 2022 to unloaded 75% of its Bitcoin stock, and therefore did not benefit financially from his announcements.
These two instances of dubious legality are key evidence that the grey area of morality is very much present when discussing criminal activity within finance. A man like Elon Musk greatly influences financial markets and their complex stability. Therefore, when Musk comments on a big move or simply posts his opinion on Twitter, thousands and millions of people act accordingly, yet the question that remains is, is cause for crime? or is this just his immense influence on the market?
By Annika Bjerregaard Edited by Aurore Lebrun & Annika Bjerregaard
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