Lawsuit claiming Logan Paul defrauded investors with CryptoZoo NFTs heads to mediation—8 months after Paul promised $1.8 million in restitution
YouTuber Logan Paul—alongside four other defendants—is entering formal mediation in a civil lawsuit filed against him in Austin, Texas for an alleged NFT "rug-pull" scheme with his CryptoZoo project
The lawsuit, filed in early February, named Paul, his personal assistant Danielle Strobel, his manager Jeffrey Levin, and three men: Eduardo Ibanez, Jake Greenbaum aka Crypto King, and Ophir Bentov aka Ben Roth, for the allegedly deceptive development of an uncompleted 2021 NFT game project called CryptoZoo.
Logan Paul CryptoZoo accusations
Paul, Strobel, Levin, Ibanez, and Greenbaum were all named in the complaint as founders of CryptoZoo. Ibanez was the project’s lead developer, and Bentov was the community manager for the game.
“Defendants promoted CryptoZoo Inc.’s products using Mr. Paul’s online platforms to consumers unfamiliar with digital currency products,” the complaint charged. The result was "tens of thousands of people purchasing said products.”
The complaint went on to accuse CryptoZoo of executing a “rug pull.”
In this alleged rug-pull, “developers abruptly abandon the project and fail to deliver the promised benefits all while fraudulently retaining the purchasers’ funds.”
In 2021, rug-pulls were the “go-to scam” in the cryptocurrency space, according to Chainanalysis. Victims lost $2.8 billion to pulls in that year alone. Rug-pulls initially appear to be legitimate cryptocurrency project. They're promoted heavily so the price of the token rises—then at the peak, scammers sell and disappear.
Logan Paul and his associates say they never sold their NFTs, so CryptoZoo couldn’t have been a rug-pull.
But the lawsuit charged that the defendants never intended to undertake the “expensive and time-consuming process to create a functional CryptoZoo game or support it.”
Instead, they “deliberately undertook a scheme to defraud Plaintiff and other consumers.”
The lawsuit was filed by two Houston-based attorneys, Jarrett Ellzey of the law firm Ellzey & Associates and Tom Kherkher of Attorney Tom & Associates. Kherkher has a YouTube channel with over a half-million subscribers, where he goes by AttorneyTom.
In a Jan. 16 video about a related arbitration case against CryptoZoo, AttorneyTom laid out objections to a plan Paul proposed out to pay back some investors. The proposition, AttorneyTom explained, only refunded accounts holding “base eggs and base animals” (specific types of crypto collectibles). It didn’t refund holders of other crypto collectibles, called zoo tokens, or hybrid animals, it didn’t account for those who sold at a loss, and it wouldn’t fully compensate other losses.
In September 2021 one NFT sold for 22ETH (around $88,000 USD then). The best offer for it now on the Opensea marketplace is 0.0096ETH, or $17.78.
Kherkher’s office didn’t respond to a request for comment.
YouTuber Coffeezilla released a three-part documentary series in December 2022 detailing a trail of broken promises in the development of the game.
Coffezilla's series also documented millions of dollars in losses for individual investors. In the wake of Coffeezilla’s videos, Paul threatened to sue Coffezilla. After backlash, Paul quickly deleted that video. He released a contrite message in January promising $1.8 million in restitution to some investors in the project.
But payouts haven’t been forthcoming.
After a Jan. 16 update in the CryptoZoo Discord detailing his initial plan, Paul complained that he would “no longer be the scapegoat for anyone’s financial decisions.”
Paul claims he's the victim of a scam himself. He blames Ibanez, his former lead developer, and says he and his associates made no money from the venture.
On July 28 lawyers for the plaintiff and four of the defendants submitted their joint request for a 90-day stay on the case. They asked to pursue formal mediation “with the aim of resolving all claims against Paul, Levin, Bentov, and Strobel.”
As it was a joint request, the judge quickly granted it the same day.
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