A Texas magistrate judge has recommended that YouTuber Logan Paul’s bid to dismiss a proposed class-action lawsuit over his abandoned NFT project, CryptoZoo, be granted.
On Thursday, Magistrate Judge Ronald Griffin told an Austin federal court that the plaintiffs had not sufficiently linked Paul to their allegations of financial losses from buying into the project. His recommendation means a federal judge could toss the case unless the plaintiffs revise their complaint.
The suit, originally filed in February 2023, accuses Paul and others involved of orchestrating a “rug pull” by promising benefits to CryptoZoo buyers that never materialized.
Griffin, however, said the plaintiffs should be permitted to amend 26 of their 27 claims. The only exception is a claim of commodity pool fraud, which he advised should be permanently dismissed.
“Commodity pool fraud claim requires mental gymnastics”
In his 75-page report, Judge Griffin recommended tossing the lawsuit’s commodity pool fraud claim, noting that the court “does not follow Plaintiffs’ logic.”
The plaintiffs had argued that CryptoZoo NFTs functioned like option contracts, since they began as “eggs” that could “hatch” into animals and later be bred into hybrids that could then be traded.
Judge Griffin wrote: “In other words, Plaintiffs contend that because buyers purchase CryptoZoo NFTs without knowing their value until they hatch, and because those NFTs can be bred to create hybrids, an option contract is formed.”
He rejected that reasoning, adding: “The mental gymnastics required to reach this conclusion are dizzying. Plaintiffs neither explain — nor can the Court discern — how purchasing CZ NFTs amounts to option contracts or contracts for future delivery.”
Other claims fall short of linking Paul
Judge Griffin found that the lawsuit failed to adequately link Logan Paul to the 26 remaining claims, noting that plaintiffs had not shown he directly or personally profited from CryptoZoo’s downfall.
The complaint accuses Paul and others of fraud, unjust enrichment, negligence, breach of contract, conspiracy to commit fraud, aiding and abetting fraud, and violating consumer protection laws in several states.
But Griffin said much of the filing relied on “fragments of facts” with vague references to “Defendants,” or attempted to “jam together two pieces of different puzzles in the vain hope of producing a final, cohesive product.”
He concluded, “Unfortunately, caselaw does not support this tactic.”
Paul reimbursed CryptoZoo investors
The class group filed suit in 2021 against Paul and CryptoZoo co-founders Eduardo Ibanez and Jake Greenbaum. Paul later claimed in January 2024 that the pair had deceived him, leading to the project’s collapse—a claim Judge Griffin urged the court to reject in July.
In January 2023, Paul pledged to revive CryptoZoo and set aside $2.3 million to reimburse buyers, on the condition that they agreed not to pursue legal action over the project.
Refunds were issued at 0.1 Ether per NFT, matching the original 2021 sale price.
