Logan Paul's efforts to distance himself from the CryptoZoo lawsuit have faced a setback, with a Texas magistrate judge advising against his attempt to place blame solely on the project's co-founders. Magistrate Judge Ronald Griffin has recommended that a federal court in Austin deny Paul's request for a default judgment against Eduardo Ibanez and Jake Greenbaum, the co-creators of CryptoZoo. This recommendation comes in response to a lawsuit filed by CryptoZoo NFT buyers in early 2023, who allege the project was a fraudulent scheme.
The plaintiffs in the case claim that CryptoZoo, a non-fungible token (NFT) project, was a "rug pull" that failed to deliver on its promises. CryptoZoo involved users buying NFT "eggs" that would supposedly "hatch" into animals, which could then be bred to create hybrid animals tradable for tokens. However, the blockchain-based game never launched, leaving investors with worthless NFTs.
In January 2024, Paul filed a counterclaim against Ibanez and Greenbaum, alleging that he hired them to manage the project but they instead defrauded him, leading to CryptoZoo's collapse. Paul's attempt to secure a default judgment against Ibanez and Greenbaum would have meant the court ruling against them without a trial because they had not responded to the suit.
Judge Griffin reasoned that allowing Paul's request could lead to "inconsistent judgments". Granting a default judgment and placing all blame on Ibanez and Greenbaum could undermine the plaintiffs' claims against Paul and the other defendants. The judge emphasized that the core issue is whether the defendants collectively engaged in fraudulent activities in promoting and operating CryptoZoo. He noted that the defendants appear to be similarly situated and share closely related defenses, making it inappropriate to single out Ibanez and Greenbaum.
Furthermore, Judge Griffin stated that Paul has not proven his claims against Ibanez and Greenbaum are distinct from those of the plaintiffs, who seek to hold all defendants, including Paul, jointly liable. This aligns with judicial caution in multi-defendant fraud cases, where collective responsibility must be evaluated holistically rather than piecemeal.
In a separate legal battle, Paul is also suing YouTuber Stephen Findeisen, known as "Coffeezilla," for defamation related to videos Findeisen made about CryptoZoo. Findeisen has requested that this case be combined with the lawsuit against Paul by CryptoZoo NFT buyers, a move that Paul opposes.
Despite the legal challenges, Paul attempted to mitigate the fallout by setting aside $2.3 million in January 2023 to refund CryptoZoo NFT buyers, offering 0.1 ETH per token, the original sale price in 2021. However, this offer came with the condition that recipients agree not to sue.
Meanwhile, another judge has suggested that Logan Paul shouldn't face the current complaint from CryptoZoo Inc. customers, arguing that the plaintiffs haven't sufficiently proven Paul's enrichment from the venture. However, this judge also recommended that the plaintiffs be allowed to revise and resubmit most of their claims.
Paul's legal team has expressed satisfaction with the report and intends to continue fighting to clear his name, maintaining that CryptoZoo was derailed by others who did not have the project's best interests at heart. Conversely, the purchasers' legal representatives have stated their intention to file an amended complaint to address the issues raised by the court.
