US Judge backs Logan Paul’s bid to toss CryptoZoo suit

On Thursday, U.S. Magistrate Judge Ronald Griffin said Logan Paul’s bid to remove a lawsuit over the collapse of CryptoZoo should be allowed. He also allowed the class-action complaint to update its claims against the YouTuber.

Judge Griffin sided with Paul’s bid to dismiss a proposed class-action lawsuit over his defunct NFT project, CryptoZoo. He said there’s not sufficient evidence tying the YouTuber to the class action plaintiff’s claims of losing money in the crypto project.

Judge asks  plaintiff to update its claims

The federal judge could drop the suit unless the plaintiff updates it. The complaint sued Paul in 2023 for allegedly running a rug pull that promised perks that never materialized, after they bought and lost their CryptoZoo NFTs. 

The judge urged the plaintiff to update all 27 claims against Paul in the lawsuit, except one. He also mentioned in his 75-page report that the claim alleging the YouTuber engaged in commodity pool fraud should be permanently dismissed.

The judge based his decision to dismiss the lawsuit’s commodity pool fraud on not understanding the plaintiff’s logic. The complaint claimed that CryptoZoo NFTs were an option contract due to how they could be traded. Griffin acknowledged that the dynamics of CZ NFTs, which allowed buyers to purchase the tokens unaware of their value till they hatch, made them option contracts. 

“The mental gymnastics required to come to this conclusion are truly dizzying. Plaintiffs do not explain – nor can the Court understand – how their purchases of CZ NFTs create option contracts or contracts for future delivery.”

-Ronald C. Griffin, U.S. Magistrate Judge

Griffin also argued that the other 26 claims in the lawsuit failed to properly connect to the YouTuber. He called for more evidence showing that Paul directly and personally benefited from the crypto project’s demise.

According to the lawsuit, Logan Paul is accused of fraud, negligence, unjust enrichment, breach of contract, aiding and abetting fraud, fraud conspiracy, and breaches of consumer law in multiple states, among others. Griffin called for the complaint to give full details of Paul’s misconduct and not pieces of facts accompanied by vague attributions.

The judge also noted that the complaint combined two different pieces of facts in the vain hope of producing a final, cohesive product. He concluded that the caselaw does not support that kind of tactic. As previously reported by Cryptopolitan, the YouTuber has also faced other allegations of misleading fans about crypto investments.

Paul blames CryptoZoo co-founders for the project’s collapse

The complaint sued Paul in 2023, together with the project’s co-founders, Eduardo Ibanez and Jake Greenbaum, over their alleged involvement in CryptoZoo’s fall. The YouTuber also tried evading the lawsuit by suing the co-founders of conning him and causing the collapse of the crypto project.

Griffin dismissed Paul’s bid in July, arguing that it would result in inconsistent judgments if the court ruled against Ibanez and Greenbaum without a trial because they hadn’t responded to the allegations. The judge argued that the YouTuber’s bid to blame the duo and accuse them of the downfall of CryptoZoo could see the lawsuit go nowhere, as they hadn’t appeared in court. He called for the court to look into whether the duo, together with Paul, committed fraudulent acts while operating CryptoZoo.

Griffin also maintained that Paul’s allegations are only against his co-founders and not the claims from the NFT buyers. He said the YouTuber has not demonstrated to the court that there exists any reduced risk of inconsistent judgments based on his claims. 

The judge concluded that Paul and the co-founders of CryptoZoo are similarly situated and possess closely related defenses. He added that the trio is charged with some strain of joint liability and that ruling on Paul’s motion at the time would undeniably result in inconsistent judgments.

Paul wanted to refund the CryptoZoo NFT buyers in 2023 under the condition that they agreed not to sue over the project. He later refunded buyers 0.1 ETH, equivalent to what the tokens were originally sold for in 2021.

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