Logan Paul Scores Major Win in CryptoZoo NFT Legal Battle

TLDR

• Texas magistrate judge recommended dismissing most claims in the CryptoZoo lawsuit against Logan Paul
• Judge permanently rejected commodity pool fraud claim, calling plaintiffs’ arguments “dizzying”
• Plaintiffs failed to establish direct ties between Paul and their financial losses
• Paul pledged $2.3 million to reimburse buyers who agree not to pursue legal action
• Paul has filed a defamation lawsuit against YouTuber Coffeezilla over CryptoZoo reports

A Texas magistrate judge has recommended dismissing most of a proposed class-action lawsuit against YouTuber Logan Paul over his collapsed NFT venture, CryptoZoo. The ruling could weaken the case brought by a group of CryptoZoo buyers who filed the lawsuit in February 2023.

Magistrate Judge Ronald Griffin advised an Austin federal court on Thursday that the plaintiffs had failed to establish direct ties between Paul and their financial losses. The lawsuit accused Paul and his co-defendants of orchestrating a “rug pull” by promising features and rewards that never materialized.

In his 75-page report, Griffin concluded that one of the group’s 27 claims, alleging Paul engaged in commodity pool fraud, should be dismissed permanently. Plaintiffs had argued that CryptoZoo NFTs functioned like option contracts, since buyers initially purchased “egg” NFTs that later “hatched” into animals which could be bred into hybrids.

“The mental gymnastics required to come to this conclusion are truly dizzying,” Griffin wrote. He added that plaintiffs failed to show how such purchases amounted to option contracts or contracts for future delivery.

The judge did recommend that the plaintiffs be given an opportunity to amend the remaining 26 claims. These span fraud, unjust enrichment, negligence, breach of contract, and violations of state consumer laws.

Lack of Evidence Against Paul

Central to Griffin’s recommendation was the lack of evidence tying Paul personally to CryptoZoo’s downfall. He noted that much of the complaint relied on “fragments of facts” and vague attributions to “Defendants” rather than demonstrating Paul’s direct involvement or personal gain.

“In some instances, plaintiffs attempt to jam together two pieces of different puzzles in the vain hope of producing a final, cohesive product,” Griffin wrote. He emphasized that legal precedent does not support such tactics.

The lawsuit also names CryptoZoo co-founders Eduardo Ibanez and Jake Greenbaum. Paul has maintained that the pair misled him, leading to the project’s collapse, a claim the court previously signaled it was unlikely to accept.

In January 2023, Paul pledged to reimburse buyers, setting aside $2.3 million for refunds. Claimants were compensated 0.1 ETH, roughly the original mint price of a CryptoZoo NFT in 2021, provided they agreed not to pursue legal action.

Countersuit Against Coffeezilla

Meanwhile, Paul has filed a defamation lawsuit against YouTuber Stephen Findeisen, known as Coffeezilla. Paul argues that Findeisen’s reports on CryptoZoo falsely portrayed him as defrauding his audience.

The lawsuit, filed on June 27 in a San Antonio, Texas District Court, stems from videos Findeisen produced about Paul’s failed CryptoZoo NFT project in 2022. The lawsuit alleges that Findeisen “maliciously and repeatedly published false statements accusing Paul of operating a scam in connection with a troubled blockchain project called CryptoZoo.”

Paul seeks to hold Findeisen accountable for his actions and the damage caused to his reputation through what he claims was the intentional spread of defamatory falsehoods.

The recommendation could see a federal judge drop the suit unless the class group updates it with stronger evidence connecting Paul directly to their losses. Judge Griffin’s report makes it clear that the current complaint lacks specific evidence of Paul’s personal involvement or benefit from CryptoZoo’s failure.

Griffin’s detailed 75-page report highlighted that only fragments of facts were presented without clear ties to Paul specifically. The judge found the commodity pool fraud claim particularly weak, as plaintiffs failed to demonstrate how CryptoZoo NFTs constituted option contracts.

While most claims may be amended, the core issue remains the plaintiffs’ inability to show direct links between Paul and the project’s collapse or their financial losses.

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