U.S. court rejects Logan Paul's bid to shift CryptoZoo lawsuit blame to co-founders

A U.S. federal court has ruled that YouTuber and WWE wrestler Logan Paul cannot evade liability in the CryptoZoo lawsuit by attempting to deflect responsibility onto his co-founders, Eduardo Ibanez and Jake Greenbaum. Magistrate Judge Ronald Griffin advised the court to reject Paul’s motion for a default judgment against the two, arguing that such a decision would risk creating conflicting legal outcomes and undermine the plaintiffs’ claims of collective fraud. The ruling comes in a case filed in early 2023 by NFT investors who allege that the 2021-launched project, which promised a blockchain-based game with tradable hybrid animals, was a deceptive “rug pull” that failed to deliver its promised utility [1].

The plaintiffs accuse Paul, Ibanez, and Greenbaum of misrepresenting the project as a functional game while exploiting investor funds. Paul’s counterclaim, filed in January 2024, asserts that Ibanez and Greenbaum defrauded him by misrepresenting their role in the project and contributing to its collapse. However, Judge Griffin emphasized that the court’s primary task is to determine whether all defendants—including Paul—participated in fraudulent conduct. Granting a default judgment against Ibanez and Greenbaum, who have not responded to the lawsuit, would unfairly isolate them while ignoring Paul’s potential liability. “If the Court were to grant default judgment and thereby lay all blame on Ibanez and Greenbaum, what would come of Plaintiffs’ claims as to Paul and the other defendants?” the judge wrote [1].

The judge further noted that Paul had not demonstrated that the nature of the claims against the co-founders posed a reduced risk of inconsistent judgments. By rejecting the motion, the court aims to ensure a unified assessment of joint liability, a critical principle in fraud cases involving multiple defendants. “The court believes defendants are similarly situated and possess closely related defenses,” Griffin stated, stressing that divergent treatment would disrupt the judicial process [1]. This approach aligns with standard legal procedures prioritizing equitable resolution when allegations of collaborative misconduct are at play.

The lawsuit now moves forward unless the district court overturns the magistrate’s recommendation. If upheld, the ruling could compel Paul to defend his role in the project alongside his co-founders, rather than using procedural tactics to shift blame. The case also highlights the broader risks of blockchain-based ventures, where unmet promises and opaque operations often lead to investor disputes.

Separately, Paul faces a defamation lawsuit from content creator Stephen Findeisen (known as Coffeezilla), who accused him of misleading investors in a viral exposé about CryptoZoo. While this case remains distinct from the NFT buyers’ lawsuit, it underscores the legal scrutiny faced by high-profile figures in the crypto space [1].

The judicial guidance in the CryptoZoo case may influence similar lawsuits involving multiple defendants, particularly where liability is intertwined. Courts are increasingly cautious about allowing one party to deflect blame without addressing their own potential culpability. This approach reinforces the principle that accountability in fraudulent schemes cannot be circumvented through procedural maneuvering.

Source:

[1] [Invezz] [https://invezz.com/news/2025/07/25/us-judge-says-logan-paul-cant-escape-cryptozoo-lawsuit-by-shifting-blame/]

[2] [Law360] [https://www.law360.com/consumerprotection]