Plaintiffs in the US case claim Mr Musk used his social media presence and an appearance on Saturday Night Live to drive up dogecoin’s price by “more than 36,000 per cent over two years and then letting it crash”.
The filing alleges that Mr Musk “used his pedestal as World’s richest man to operate and manipulate the Dogecoin Pyramid Scheme.”
Lawyers for the tech billionaire described the lawsuit as a “fanciful work of fiction” based on “innocuous and often silly tweets” about the cryptocurrency, Reuters reported.
“There is nothing unlawful about tweeting words of support for, or funny pictures about, a legitimate cryptocurrency,” his lawyers said. “This court should put a stop to plaintiffs’ fantasy and dismiss the complaint.”
Dogecoin is currently worth around $0.07, down nearly 90 per cent from the all-time high it experienced in May 2021.
Despite the losses, dogecoin retains a market cap of more than $10 billion, ranking it among the top 10 most valuable cryptocurrencies.
The meme-inspired coin has also largely followed broader market trends, with a record peak in 2021 followed by prolonged losses.
The $258 billion figure is triple the estimated decline in dogecoin’s value in the 13 months following the price peak.
Mr Musk has previously revealed that dogecoin is one of only three cryptocurrencies that he owns, alongside bitcoin and Ethereum.
In a 2021 interview with Time magazine, Mr Musk claimed that dogecoin had the financial fundamentals to serve as a mainstream form of currency.
“Even though it was created as a silly joke, dogecoin is actually better suited for transactions [than bitcoin],” he said. “It is slightly inflationary... but that’s actually good as it encourages people to spend rather than to hoard it as a store of value.”
In June 2022 he said he would not sell his dogecoin holdings, regardless of the price fluctuations.
“I will keep supporting dogecoin,” he tweeted, before confirming to a follower that he would “keep buying it.”