Musk, Tesla go on attack against Dogecoin plaintiffs lawyer

(Reuters) – A New York plaintiffs lawyer who leveled splashy insider trading accusations against Elon Musk and Tesla knew that the premise of his case was false before he lodged his claims, according to a new sanctions motion by Tesla and its CEO.

Musk and the company are seeking Rule 11 sanctions against Evan Spencer of Evan Spencer Law, who represents a prospective class of Dogecoin investors suing Musk and Tesla for allegedly duping them into buying the coins.

In June, Spencer filed an amended complaint alleging that Musk and Tesla reaped billions of dollars by selling off Dogecoin from eight crypto wallets after Musk drove up prices by hyping the coins in Twitter posts.

But according to the new motion, neither Musk nor Tesla owned the wallets cited in the amended complaint – and Spencer had reason to doubt that they did even before he filed the amended complaint accusing the defendants of insider trading.

In particular, the motion said, Musk and Tesla had already disclaimed ownership of one of the disputed wallets in their motion to dismiss a previous iteration of the class action. And Spencer himself, in an earlier Dogecoin complaint, cited sources who attributed ownership of that wallet to trading platform Robinhood, the sanctions motion said.

After Spencer filed the allegedly baseless amended complaint on June 7, defense lawyers from Quinn Emanuel Urquhart & Sullivan sent him a letter on June 9, informing the plaintiffs lawyer that the amended pleading was fatally flawed. That letter, signed by Musk defender Alex Spiro of Quinn, said flatly that Musk and Tesla did not own the disputed wallets and did not sell Dogecoin.

Spiro warned Spencer that Musk and Tesla would move for sanctions unless he withdrew the suit.

Instead, as I’ve reported, Spencer moved for Quinn Emanuel to be disqualified for a purported conflict of interest in representing both Tesla and its CEO and for allegedly leaking the June 9 letter to the New York Post.

Spencer declined via email to comment on the new sanctions motion. Tesla did not respond to my query.

Spencer has previously said in court filings that he had good reason to doubt Quinn Emanuel’s assertions that neither Tesla nor Musk owned the crypto wallets at the heart of his amended complaint. Among other things, he said Quinn Emanuel did not back up those contentions with sworn affidavits.

The new sanctions motion is accompanied by sworn declarations attesting that neither Musk nor Tesla owned the disputed wallets. Jared Birchall, who is the president of Musk’s family office, Excession LLC, said he has sole responsibility for directing Musk’s crypto trades. None of the wallets cited in the Dogecoin complaint, Birchall said in the declaration, belong to Musk. Birchall also said that Musk “has not sold Dogecoin using any other crypto wallet.”

In a second declaration, Tesla compliance director Suk Patel said the company not only does not own any of the wallets Spencer cited but has “not sold Dogecoin at any time.”

Spencer’s insider trading allegations, the sanctions motions said, hinge on his assertion that the crypto wallets cited in his complaint sold Dogecoin when the tokens were trading at relatively high prices. Since the wallets did not actually belong to Musk and Tesla, the motion said, Spencer’s claims in the latest complaint “are pure fabrications.”

The motion asked U.S. District Judge Alvin Hellerstein of Manhattan to dismiss Spencer’s suit and award fees and cost to Musk and Tesla.

Spencer seems unlikely to back down, based on a reply brief he filed last week in connection with his motion to disqualify Quinn Emanuel.

Spencer was responding to a July 6 Quinn Emanuel filing that picked apart his allegations of conflict and unethical conduct. The defense firm described the disqualification motion as “yet another fanciful work of fiction by Spencer in a long chain of such pleadings, a waste of this court’s time, and an insult” to Quinn Emanuel. Among other things, Quinn Emanuel argued that Spencer offered no evidence to back his claim that Spiro leaked the threatening June 9 letter to the New York Post – and that, even if the leak came from Quinn Emanuel, the firm was not ethically constrained from talking to reporters about a case that has received more than its fair share of media attention. A Quinn Emanuel spokesperson did not immediately reply to a request for comment.

Spencer retorted in his July 12 reply that Quinn Emanuel had resorted to making “frivolous” Rule 11 threats — and then leaking those baseless threats to the Post — because Musk and Tesla were afraid to litigate the merits of plaintiffs’ claims in a motion to dismiss the amended complaint.

“There may be circumstances where shenanigans like these are narrowly within the ethics rules, but threatening a frivolous Rule 11 motion and lying about plaintiffs and their attorney in the press is not,” Spencer wrote. “It is difficult to infer that this maneuver had any substantial purpose other than to churn the fire and bedazzle a rich client.”

Neither side, you may have noticed, is short on spicy rhetoric.

But rhetoric aside, Musk and Tesla offer a persuasive argument that ownership of the disputed crypto wallets is the key to Spencer’s insider trading allegations, which are the most serious and attention-grabbing claims in the latest version of the class action. The defendants have now offered sworn declarations that they didn’t own the wallets.

At the very least, those declarations cast doubt on Spencer’s latest complaint. If he’s got evidence to contradict the declarations, now is the time to make it public.

Read more:

Dogecoin plaintiffs lawyers move to oust Musk, Tesla counsel after ‘leaked’ sanctions letter

Elon Musk is accused of insider trading by investors in Dogecoin lawsuit

Reporting By Alison Frankel

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