A Texas magistrate judge has recommended dismissing most of a proposed class-action lawsuit against YouTuber Logan Paul over his collapsed NFT venture, CryptoZoo, in a ruling that could sharply weaken the case.
Key Takeaways:
- A Texas magistrate judge recommended dismissing most claims in the CryptoZoo class-action lawsuit against Logan Paul.
- The judge permanently rejected the commodity pool fraud claim, calling plaintiffs’ arguments “dizzying.”
- Plaintiffs may amend 26 other claims, but failed to show evidence tying Paul personally to CryptoZoo’s collapse.
Magistrate Judge Ronald Griffin advised an Austin federal court on Thursday that the plaintiffs, a group of CryptoZoo buyers, had failed to establish direct ties between Paul and their financial losses.
The lawsuit, filed in February 2023, accused Paul and his co-defendants of orchestrating a “rug pull” by promising features and rewards that never materialized.
Commodity Pool Fraud Claim Tossed
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, however, recommend that the plaintiffs be given an opportunity to amend the remaining 26 claims, which span fraud, unjust enrichment, negligence, breach of contract, and violations of state consumer laws.
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, emphasizing 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.
Logan Paul Sues Coffeezilla Over CryptoZoo Defamation Claims
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.
Logan Paul says me interviewing people who lost money in CryptoZoo is "milking the shit out of it", and if I continue to do so and call this a scam: it's going to be worse for me in his lawsuit. pic.twitter.com/quDUrd4ELm
— Coffeezilla (@coffeebreak_YT) January 4, 2023
The lawsuit, filed on June 27 in a San Antonio, Texas District Court, stems from videos Findeisen produced about Paul’s failed CryptoZoo non-fungible token (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 significant damage caused to his reputation through the intentional spread of defamatory falsehoods, as stated in the court filing.
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