The beginning of 2023 has been difficult for logan paul and his NFT escapades. Apparently it all started with a multi-part video expo created by a youtuber known as with coffee (real name Stephen Findeisen). In the series, Findeisen recounts the rise and ultimate demise of Paul’s once-popular NFT project. cryptozoo, offering evidence that Paul and his team may have defrauded investors. After a brief dispute between Paul and Findeisen, the accused celebrity ultimately opted for assume the responsibilitypledging to return 1000 ETH (about $1.3 million at the time) to those who lost money on the project.
But that apology was far from the end. On February 2, 2023, a lawsuit was filed against CryptoZoo, Logan Paul, and others alleging fraud, breach of contract, unjust enrichment, and much more. With mounting charges and Paul’s company prices still falling, the collectors get caught in the crossfire. Now the question has been raised: How does the NFT space proceed from here?
Recapping Logan Paul’s NFT Influence
In order to find a way forward, we must first understand the events that led to the current situation. While the CryptoZoo fiasco may have taken center stage, the project isn’t the first time Logan Paul has incited controversy on Web3. In 2021, Paul emerged as an apparent advocate for blockchain technology and culture, quickly making waves by collecting expensive and influential NFTs from rising projects. But before long, his name caught on, linking up with a new meme coin called Dink Doink.
Through podcast appearances and social media posts, Paul spoke positively about Dink Donk, which was marketed through a humorous South Park-inspired persona. Paul even said that he was “all in” on the coin. via a Twitter post. However, throughout this promo, Paul failed to mention that there was in fact helped create the project. In addition, Paul received a significant amount of the token supply (somewhere to the tune of 120 billion, according to some sources) pre launch.
The coin turned out to be a classic pump and dumpwith Paul and those around him promoting him to increase in value before selling your shares and allowing the coin to crash and burn. Shortly thereafter, Paul distanced himself from the project and from others who helped orchestrate it. The entire debacle was widely publicized, even reaching a Findeisen’s later exhibition.
While Paul was never charged for the alleged scam, NFT enthusiasts denounced his actions. Some even used blockchain analytics tools to find the influencer’s crypto wallet and determine how much he extracted from the Dink Doink ecosystem. it was over $100,000and while this evidence was never confirmed to point directly to Paul (due to the decentralized and anonymous nature of software wallets on the blockchain), his alleged wallet would later have a direct link to the CryptoZoo infrastructure.
Thus began the initial tarnishing of Paul’s NFT reputation. While other projects, like liquid marketfurther soured Web3’s attitude towards Paul, CryptoZoo was another beast altogether.
The cryptozoo fiasco
In the fall of 2021, just a few months after Dink Doink, Paul began promoting his own NFT project, CryptoZoo. The company was apparently inspired by Pokémon, and Paul marketed it as “a really fun game that makes you money.” Collectors could buy NFT eggs and hatch hybrid animals depicted with airbrushed photos of penguins-sharks, ducks-dogs, etc. From there, users could breed these hybrids with others to produce increasingly rare NFTs. The system resembled Axie Infinity but with the general theme of profitability through peer-to-peer NFT trading and passive play-to-win mechanics.
Like other popular PFP projects released throughout 2021, CryptoZoo seemingly bit off more than it could chew, and the game never came to fruition. Although Paul supposedly put $1 million of your own money In the making of the game, and the initial 10,000 NFTs (priced at 0.1 ETH each) ran out, the team that led the effort seemed to continually hit roadblocks. They announced delay after delay until months had passed with almost nothing to show for it.
As time went on, it began to feel as though Paul had once again distanced himself from one of his projects, with his subsequent NFT effort, 99 originals, soon became top of mind for his Web3 fans. But those who had invested heavily in CryptoZoo, of which there were many, began to feel cheated.
In December 2022, more than a year after CryptoZoo’s initial launch, Findeisen stirred the pot for the first time by publishing his three-part series. Chronicling the alleged infighting and disagreements between the CryptoZoo founders and the many promises made to the project’s collectors that the developers never followed through on, the long-running Findeisen series seemed to be the nail in the coffin of Paul’s supposed passion project.
CryptoZoo lawsuit and the importance of arbitration
On February 2, 2023, attorneys for Ellzey & Associates and attorney Tom & Associates filed a lawsuit seeking certification of a class action lawsuit in the Western District of Texas against Logan Paul, Danielle Strobel, Jeffrey Levin, Eddie Ibanez, Jake Greenbaum (Crypto King), and Ophir Bentov (Ben Roth) for the CryptoZoo fiasco. The effort is spearheaded in part by prominent lawyer and YouTuber Tom Kherkher, better known by his username, LawyerTom.
He 26 page official presentation paints a detailed picture of Paul and company. apparently turning its back on CryptoZoo investors, claiming that “defendants marketed CryptoZoo NFT to buyers by falsely claiming that in exchange for transferring cryptocurrency to purchase CryptoZooNFT, buyers would then receive benefits.”
According to Kherkher, who posted a 10-minute video outlining the lawsuit, CryptoZoo’s terms and conditions contained two main clauses that can affect a victim’s ability to take legal action: the first is a mandatory arbitration clause and the second is a mandatory arbitration clause. class action waiver.
In short, forced arbitration requires that disputes between parties (in this case, CryptoZoo and investors) be resolved through arbitration (privately mediated dispute resolution) rather than in the court system, and a class action waiver prohibits that victims come together as a group to bring legal action. Essentially, if you bought zoo eggs or tokens, you signed off your rights to sue CryptoZoo in court.
So how were Ellzey & Associates and attorney Tom & Associates able to help plaintiffs circumvent arbitration and file a class action lawsuit? According to Kherkher, the fact that a clause exists within the terms and conditions does not necessarily make it applicable.
“In fact, I think there are quite a few terms and conditions present in the CryptoZoo agreement that I think are unenforceable,” Kherkher said in the YouTube video. Though he went on to add that in addition to the class action, there is a situation where he and his associates may need to participate in arbitration (for all represented individuals) due to the aforementioned clauses.
Forced arbitration has been a major point of legal contention in recent years, with the US House of Representatives. passing an account prohibiting arbitration agreements in March 2022. Although, judging by the legal efforts of Kherkher and others, this appears to have had no effect on CryptoZoo’s terms and conditions established in September 2021.
What NFT collectors should consider moving forward
Again, we ask: How does the NFT space proceed from here? For those affected by CryptoZoo, waiting for a possible settlement, either from the lawsuit or from Paul’s pockets, might be the only solution. But there is a bigger problem here; the issue of responsibility, and it goes far beyond CryptoZoo.
Due to many factors, including the lack of regulation on Web3, everyone from novice enthusiasts to seasoned business veterans have fallen victim to scams over the years. While legal action has been taken against a wide variety of large-scale NFT effortscryptocurrency exchanges and other Web3 empires that have come under SEC scrutiny, bad actors continue to thrive on the blockchain.
Of course, things are constantly changing, and the rise of SEC investigations, the advent of crypto-invoices, and even lawsuits related to intellectual property are certainly leading the way towards regulation. But for those who own CryptoZoo eggs and are contemplating selling them at a huge loss only to put the debacle behind them, salvation still seems far off.
Amidst all the drama, though, perhaps a lesson has been learned: while top influencers often appear to be a benevolent force poised to help drive mainstream adoption, they can just as easily push Web3 back by delegitimizing it. to their NFTs and blockchain technology.
