U.S. Judge Blocks Logan Paul from Holding CryptoZoo Co-Founders Solely Liable Over Legal Consistency Concerns

A U.S. federal magistrate has ruled that YouTuber Logan Paul cannot pursue a default judgment against the co-founders of his failed NFT project, CryptoZoo, to avoid creating conflicting legal outcomes. Judge Ronald Griffin of the Texas Western District Court emphasized that allowing Paul’s motion to hold Eduardo Ibanez and Jake Greenbaum solely responsible for the project’s collapse would undermine the broader lawsuit involving NFT buyers who allege fraudulent practices. The ruling highlights the complexities of attributing liability in multi-party crypto litigation.

The dispute traces back to CryptoZoo, a 2021 project that sold NFTs and a token but never delivered its promised blockchain-based game. NFT buyers sued Paul, Ibanez, and Greenbaum in early 2023, accusing the trio of a “rug pull”—a deceptive exit strategy where developers abandon a project after securing funds. Paul later filed a counterclaim in January 2024, asserting that Ibanez and Greenbaum defrauded him, leading to the project’s failure. However, Judge Griffin rejected the motion, noting that Ibanez and Greenbaum have not responded to the lawsuit, making it inappropriate to isolate their liability without addressing the broader claims against all defendants.

The judge stressed that plaintiffs’ allegations of joint fraud against Paul and his co-founders remain unresolved. “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?” Griffin wrote. The court highlighted that all parties are “similarly situated” in terms of potential liability, with plaintiffs asserting collective responsibility. By ruling on Paul’s motion alone, the court warned, it risks creating inconsistent legal standards for the same case.

CryptoZoo’s structure involved NFT “eggs” that could hatch into tradable digital animals, but the game’s development stalled. In 2023, Paul refunded buyers 0.1 Ether (ETH)—the original price of the NFTs—under the condition that claimants waived their right to sue. Meanwhile, Paul faces a separate defamation lawsuit from content creator Stephen Findeisen (known as “Coffeezilla”), who criticized CryptoZoo in a viral video. While the court allowed Findeisen’s case to proceed, Paul has opposed merging it with the existing lawsuit [1].

The ruling underscores the legal challenges in crypto projects involving multiple stakeholders. Courts must balance individual accountability with collective responsibility, particularly when projects fail due to systemic issues rather than isolated misconduct. For investors, the case illustrates the risks of NFT ventures, where unfulfilled promises can trigger protracted litigation. The outcome also emphasizes the importance of clear contractual terms in partnerships; ambiguities can leave parties vulnerable to counterclaims and overlapping liabilities.

In parallel, the crypto legal landscape remains volatile. A 2024 appellate court overturned a $9 million judgment against Yuga Labs in a separate dispute with artist Ryder Ripps, signaling judicial uncertainty in applying traditional legal frameworks to digital assets. These cases collectively reflect the evolving nature of crypto regulation, where courts grapple with balancing innovation, investor protection, and accountability.

Source:

[1] [Judge Advises Logan Paul Can’t Share Blame Over CryptoZoo]

https://cointelegraph.com/news/logan-paul-shouldnt-blame-cryptozoo-founders-judge-says