Magistrate Recommends Rejecting Paul's Liability Shift in CryptoZoo Case

A Texas federal magistrate has recommended rejecting YouTuber Logan Paul’s bid to deflect liability in the CryptoZoo NFT lawsuit by targeting the project’s co-founders. Magistrate Judge Ronald Griffin emphasized that granting Paul’s motion for a default judgment against Eduardo Ibanez and Jake Greenbaum could create “inconsistent judgments,” undermining the broader litigation [1]. The case, initially filed by NFT buyers in early 2023, alleges that CryptoZoo—a blockchain-based game promising users to hatch and breed digital animals—constituted a fraudulent “rug pull,” with unfulfilled promises and mismanagement. Paul’s counterclaim against Ibanez and Greenbaum, filed in January 2024, accuses them of deception, but the judge argued that Paul has not proven his claims are distinct from those of the plaintiffs, who seek to hold all defendants, including Paul, jointly liable [1].

Griffin’s reasoning centered on the interconnected nature of the legal defenses. By isolating Ibanez and Greenbaum as the sole culprits, Paul risks fragmenting the case and creating conflicting outcomes. “Defendants are similarly situated and possess closely related defenses,” the judge noted, adding that the plaintiffs’ allegations of joint liability complicate unilateral blame-shifting [1]. This stance aligns with judicial caution in multi-defendant fraud cases, where collective responsibility must be evaluated holistically rather than piecemeal.

The controversy traces back to CryptoZoo, launched in 2021, where users paid for NFT “eggs” tied to unmaterialized game features. In January 2023, Paul announced a $2.3 million refund plan, offering 0.1 Ether (ETH) to buyers—the original purchase price—while requiring claimants to waive further legal action [1]. This initiative, while mitigating immediate damages, did not resolve allegations of fraud or mismanagement.

Parallel legal challenges compound Paul’s situation. A June 2024 defamation lawsuit against YouTuber Stephen Findeisen, known as “Coffeezilla,” accuses him of producing defamatory content about CryptoZoo. Findeisen has sought to consolidate this case with the NFT buyers’ lawsuit, a request Paul opposes [1]. The overlapping litigation underscores the complexities of liability in decentralized projects, where roles and responsibilities are often ambiguously defined.

The judge’s recommendation highlights risks inherent in using procedural motions to shift blame in collaborative ventures. By advocating for a unified resolution, Griffin’s guidance aligns with principles of judicial efficiency, aiming to prevent piecemeal adjudication that could confuse liability apportionment. For investors and entrepreneurs in the crypto space, the case underscores the importance of clear contractual agreements and due diligence in multi-party collaborations [1].

The outcome of Paul’s motion remains pending the federal court’s final decision. If adopted, the recommendation would require all parties to proceed through the full litigation process, clarifying each defendant’s culpability. The case also raises broader questions about accountability in blockchain-based projects, where the lines between innovation, promotion, and deception can blur.

Source: [1] [Logan Paul Shouldn’t Blame CryptoZoo Founders, Judge Says](https://cointelegraph.com/news/logan-paul-shouldnt-blame-cryptozoo-founders-judge-says)