A federal magistrate judge in Texas has recommended that YouTuber Logan Paul should be allowed to escape most claims tied to his failed NFT project, CryptoZoo. However, the decision also gives investors a chance to revise their allegations and resubmit updated claims.
The Case Against Logan Paul and CryptoZoo
The proposed class-action lawsuit was first filed in February 2023 by buyers of CryptoZoo NFTs. Investors alleged the project was a “rug pull”, promising future rewards and gameplay features that never materialized. The lawsuit accused Paul and other project founders of fraud, negligence, unjust enrichment, breach of contract, and multiple consumer law violations.
CryptoZoo was marketed as an NFT game where buyers purchased digital “eggs” that would hatch into animals. These could then be bred to create hybrid creatures, which investors hoped would hold value in secondary markets.
Magistrate Judge Ronald Griffin issued a 75-page report advising that the lawsuit should mostly be dismissed against Logan Paul. He noted that the plaintiffs failed to sufficiently link Paul’s direct actions to their losses, leaving their claims weak.
Griffin was particularly dismissive of the group’s commodity pool fraud allegation, which argued that the NFTs functioned as option contracts. He rejected this, stating:
“The mental gymnastics required to come to this conclusion are truly dizzying.”
That claim will be permanently dismissed, but Griffin allowed investors to amend and refile the other 26 claims—provided they can offer stronger evidence directly tying Paul to the alleged misconduct.
Why Most Claims Fell Short
The judge criticized the complaint for offering “only fragments of facts” and vague accusations against unnamed “defendants.” He explained that simply lumping together accusations against multiple people without clear proof against Paul could not support the case.
For now, this leaves Paul in a stronger position, though the plaintiffs still have an opportunity to restructure their claims.
Refunds to CryptoZoo Buyers
Despite the controversy, Paul announced in early 2023 that he would personally refund investors. He set aside $2.3 million and offered 0.1 ETH per NFT—the original mint price in 2021—for those willing to forfeit legal action. Many buyers have since received refunds under this program.
Paul has also claimed that two of CryptoZoo’s co-founders, Eduardo Ibanez and Jake Greenbaum, deceived him and contributed to the project’s failure.
The final decision now rests with a federal judge, who could either dismiss the lawsuit entirely or allow the class to refile with updated claims. If the plaintiffs cannot tie Paul more directly to the alleged fraud, the case may ultimately collapse.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.