Judge Blocks Logan Paul from Blaming Co-Founders for CryptoZoo Collapse

A U.S. magistrate judge has ruled that YouTuber and crypto investor Logan Paul cannot shift legal blame for the collapse of his NFT project onto its co-founders, a decision that complicates his counterclaim against them in an ongoing lawsuit. Magistrate Judge Ronald Griffin advised the federal court in Austin, Texas, to deny Paul’s request for a default judgment against Eduardo Ibanez and Jake Greenbaum, arguing that such a move would create "inconsistent judgments" in a case involving multiple defendants accused of fraudulent conduct [1].

The dispute originated in early 2023, when a group of CryptoZoo NFT buyers sued Paul, Ibanez, Greenbaum, and others, alleging the project was a "rug pull." Plaintiffs claimed the team failed to deliver on promised blockchain-based games and perks, leaving investors with valueless tokens. In January 2024, Paul filed a counterclaim, accusing Ibanez and Greenbaum of defrauding him and causing the project’s collapse. However, Griffin emphasized that the co-founders’ absence from the lawsuit—and Paul’s attempt to single them out for blame—risks undermining the core legal questions about whether all defendants, including Paul, engaged in misconduct. "To rule on Paul’s motion at this time would undeniably result in inconsistent judgments," the judge wrote, noting the shared defenses and interconnected claims among the defendants [1].

Launched in 2021, CryptoZoo promised a blockchain-based game where users could trade NFT "eggs" that hatched into animals for breeding. However, the project never delivered its core game, and its token lost value. In 2023, Paul offered a partial refund of 0.1 Ether (ETH) to buyers—equivalent to the initial token price—under a non-suit agreement. This gesture did not resolve the legal disputes, as plaintiffs continue to argue the project involved misrepresentation and fraud [1].

The ruling intersects with another case in which Paul sued content creator Stephen Findeisen (known as “Coffeezilla”) for critical videos about CryptoZoo, alleging defamation. Findeisen has sought to consolidate this lawsuit with the NFT buyers’ case, but Paul opposes the move. Griffin’s decision on the co-founders’ liability could indirectly influence this dispute, as clarity around Paul’s legal standing may shape arguments in both cases [1].

The judge’s reasoning aligns with broader judicial trends in crypto litigation, where courts increasingly scrutinize collective responsibility in failed projects. While Paul’s counterclaim focuses on individual misconduct by Ibanez and Greenbaum, Griffin’s emphasis on joint liability reflects a recognition that such ventures often involve shared accountability. This mirrors recent rulings, such as the overturned Yuga Labs lawsuit against artist Ryder Ripps, where courts grappled with contractual and intellectual property issues in the NFT space [2].

The outcome also highlights risks for NFT project creators, particularly in ventures that pivot from speculative hype to legal accountability. By rejecting Paul’s bid to isolate the co-founders, the court signals that participants in such projects may face collective scrutiny. This could deter future collaborations unless clear legal boundaries are established. As the case progresses, the litigation will likely hinge on whether a trial can demonstrate fraudulent intent by any of the defendants. For now, the judge’s advisory position leaves the co-founders with an opportunity to respond, though their absence in court has already weakened Paul’s position.

Sources:

[1] [Judge Advises Logan Paul Can't Share Blame Over CryptoZoo] (https://cointelegraph.com/news/logan-paul-shouldnt-blame-cryptozoo-founders-judge-says)

[2] [US Appeals Court Overturns Yuga Labs’ $9M Win Against Ryder Ripps] (https://cointelegraph.com/news/us-appeals-court-overturns-yuga-labs-9m-win-against-ryder-ripps)