A federal magistrate judge has recommended that the class-action lawsuit against Logan Paul over his CryptoZoo project be dismissed. The judge’s recommendation, if accepted, would drop the claims that investors were defrauded, citing that the plaintiffs failed to sufficiently connect Paul to their losses.
In a ruling that could significantly undermine the case, a Texas magistrate judge has recommended the dismissal of the majority of a proposed class-action lawsuit against YouTuber Logan Paul regarding his failed NFT venture, CryptoZoo.
On Thursday, Magistrate Judge Ronald Griffin informed a federal court in Austin that the plaintiffs, a group of CryptoZoo purchasers, had failed to establish direct ties between Paul and their financial losses.
In February 2023, Paul and his co-defendants were accused of orchestrating a “rug pull” by promising features and rewards that never materialized. The lawsuit was initiated for this.
Commodity pool fraud claim dismissed
Griffin’s 75-page report concluded that one of the group’s 27 claims, alleging that Paul was involved in commodity pool fraud, should be irrevocably dismissed.
The plaintiffs contended that CryptoZoo NFTs were similar to option contracts, as purchasers initially acquired “egg” NFTs that subsequently “hatched” into animals that could be bred into hybrids.
Griffin wrote, “The mental gymnastics necessary to arrive at this conclusion are truly bewildering.” He further stated that the plaintiffs could not demonstrate that these transactions constituted option contracts or contracts for future delivery.
The judge did, however, suggest that the plaintiffs be granted the opportunity to amend the remaining 26 claims, which include fraud, unjust enrichment, negligence, breach of contract, and violations of state consumer laws.
The absence of evidence linking Paul personally to CryptoZoo’s downfall was a critical component of Griffin’s recommendation.
He observed that the complaint relied heavily on “fragments of facts” and nebulous attributions to “Defendants” rather than demonstrating Paul’s direct involvement or personal gain.
Griffin wrote, “In certain cases, plaintiffs attempt to combine two distinct puzzle pieces to achieve a final, cohesive product.” He emphasized that legal precedent does not support such strategies.
Eduardo Ibanez and Jake Greenbaum, the co-founders of CryptoZoo, are also named in the lawsuit. The court has previously indicated that it was unlikely to believe Paul’s assertion that the pair misled him, resulting in the project’s collapse.
In January 2023, Paul committed to compensating purchasers by allocating $2.3 million for refunds.
Claimants were given 0.1 ETH as compensation, approximately the original mint price of a CryptoZoo NFT in 2021, in exchange for their agreement not to pursue legal action.
Logan Paul Sues Coffeezilla Over CryptoZoo Defamation Claims
In the interim, Paul initiated a defamation litigation against Stephen Findeisen, a YouTuber better known as Coffeezilla. Paul contends that Findeisen’s reports on CryptoZoo inaccurately depicted him as defrauding his audience.
The lawsuit, which was filed on June 27 in a San Antonio, Texas District Court, is the result of recordings that Findeisen produced regarding Paul’s failed CryptoZoo non-fungible token (NFT) project in 2022.
The lawsuit claims that Findeisen “maliciously and repeatedly published false statements accusing Paul of operating a scam in connection with a troubled blockchain project called CryptoZoo.”
As stated in the court filing, Paul seeks to hold Findeisen accountable for his actions and the substantial harm he has inflicted on his reputation due to the intentional dissemination of defamatory falsehoods.
