A Texas magistrate judge has recommended dismissing the majority of a class-action lawsuit against YouTuber Logan Paul over his failed NFT project CryptoZoo. Magistrate Judge Ronald Griffin advised an Austin federal court on Thursday that plaintiffs failed to establish sufficient connections between Paul and their financial losses from the collapsed project.
The lawsuit, filed in February 2023 by a group of CryptoZoo buyers, accused Paul and co-defendants Eduardo Ibanez and Jake Greenbaum of orchestrating a "rug pull" by promising features and rewards that never materialized. CryptoZoo was an NFT project that allowed users to purchase "egg" tokens that would hatch into animal characters, which could then be bred to create hybrid NFTs for trading.
In his 75-page report, Griffin concluded that 26 of the 27 claims against Paul should be eligible for amendment by plaintiffs, but he recommended permanently dismissing one claim alleging commodity pool fraud. The judge called the plaintiffs' arguments that CryptoZoo NFTs functioned like option contracts "truly dizzying," noting they failed to explain how purchasing the NFTs created option contracts or contracts for future delivery.
The remaining 26 claims include fraud, unjust enrichment, negligence, breach of contract, and violations of state consumer laws across multiple jurisdictions. Griffin emphasized that legal precedent doesn't support connecting Paul to the project's failure, finding insufficient evidence showing Paul's direct involvement or personal benefit from CryptoZoo's collapse.
Paul previously set aside $2.3 million to refund buyers, offering 0.1 ETH each (roughly matching the original 2021 mint price) in exchange for not pursuing legal action. Despite these settlement efforts, the class-action lawsuit proceeded. Paul has also filed a separate defamation lawsuit against YouTuber Stephen Findeisen (Coffeezilla) over his 2022 CryptoZoo coverage, alleging false statements portraying Paul as defrauding his audience.
The judge's recommendation now awaits final approval from the federal court, which could dismiss the case unless plaintiffs successfully amend their claims with stronger evidence connecting Paul to their losses.
