TEXAS, USA — Earlier this month, a class action lawsuit was filed against social media and Youtube influencer Logan Paul and five others who are a part of the cryptocurrency company known as CryptoZoo LLC. Others listed in the lawsuit include Danielle Strobel, Jeffrey Levin, Eduardo Ibanez, Jake Greenbaum and Ophir Bentov, who helped found and develop the company along with Paul.
The lawsuit was filed by the Houston-based Attorney Tom & Associates, as well as attorneys from Ellzey & Associates, who both represent Don Holland, a Round Rock police officer and alleged CryptoZoo scam victim.
In 2021, Paul and the other defendants announced the launch of CryptoZoo, a platform that supposed to be, as Paul put it, "a game that earns you money." Through this venture, people would supposedly be able to play the "game" by buying and hatching "egg NFTs," which would reveal an animal image that users could collect.
Last December, a Youtuber based out of Houston named CoffeeZilla posted a three-part investigative series on CryptoZoo and why he believed it was a scam. In that series, CoffeeZilla (real name Stephen Findeisen) spoke to alleged victims of CryptoZoo's practices, and outlined the controversy behind the project.
CoffeeZilla's series raised three main points. It detailed how some of the defendants allegedly committed a "rug pull" by quietly making their own in-game purchases and then selling those digital assets profit without alerting the users. It alleged that the defendants promoted purchasing in-game currencies that yielded no return on investment. And it alleged that the defendants also stopped developing the project to its promised extent.
The lawsuit claims that these practices left users out thousands of dollars.
CoffeeZilla's Youtube series led to other online content creators making their own reaction videos, and putting CryptoZoo and Logan Paul under the internet spotlight.
Soon after, Paul responded to the YouTube claims by releasing two videos of his own in which he criticized CoffeeZilla, maintained his innocence and threatened to sue the YouTuber for defamation.
A week later, and after public backlash for those videos, Paul publicly apologized to CoffeeZilla and promised to "make things right." He also released a three-step plan to help victims of CryptoZoo, promising to divest from the company and "have no financial upside in the game." This, Paul said, would "add value to holder tokens" within the game. Paul additionally promised to create a "rewards program" that would cash out of the game more conveniently. Lastly, he vowed to complete CryptoZoo's development to a point where it lived up to its promised offering.
Because cryptocurrencies' values shift over time and are not directly backed by a country or central bank, their value can be difficult to assess. In CryptoZoo, a "base egg" that users pay to start with costs 0.1 Ethereum. In 2021, 0.1 Ethereum was valued at around $350 USD; today, 0.1 Ethereum exchanges at around $160 USD.
The lawsuit alleges that, due to the lower current exchange rate, users would only receive a fraction of what they invested into CyrptoZoo if they chose to sell their in-game NFTs in the wake of Paul's promises. But the defendants, the lawsuit claims, knowingly sold their own tokens when they were at their peak value without alerting the game's users.
In a chat on the messaging platform Discord, Paul denied culpability for users' complaints.
"I will no longer be the scapegoat for anyone’s financial decisions," he said.
In his YouTube response, he similarly maintained that he did nothing wrong.
"I know I never scammed anybody, never made any money, never sold any tokens and I only had the best intentions going in," Paul said.
Paul has previously faced backlash for a separate cryptocurrency token he promoted in June 2021 called Dink Doink. That token currently stands at a value of $0 USD. He launched an additional NFT project called 99 Originals, which he began working on in August 2021.
Neither Paul nor CoffeeZilla has responded to WFAA's request for comment on the lawsuit.
Ellzey & Associates, one of the laws firms that filed the suit, provided WFAA the following statement: "Logan Paul and the Co-Defendants promised a product — this NFT ecosystem, the ability to change animals — and promoted the product as an investment game that would make the players money. As those words were being spoken to unwitting consumers investing millions collectively in CryptoZoo, there was no product and no solid plan or timeline for completing it. There’s still no product. But all the money the consumers spent in reliance on Mr. Paul’s promotions is still out there in someone's pockets. We are confident this case will allow us to correct this wrong for Mr. Holland and the other effected class members, despite the defendants' efforts to bolt on waivers to their website 'terms and conditions' ex post facto. That doesn't work in Texas."
Although the documents say approximately 20,000 people have been affected by CryptoZoo, this lawsuit will only apply to Texans affected. But Attorney Tom & Associates' Tom Kherkher -- an active Youtuber who has also released his own videos about CryptoZoo -- said his team is representing CryptoZoo victims from “all over the world,” and have begun filing additional arbitration actions against CrytoZoo LLC.
"We are committed to getting justice for the numerous victims of the CryptoZoo fiasco and ensuring the parties responsible are held accountable," Kherkher told WFAA.
You can read the full lawsuit here.
