A deep dive into Logan Paul’s NFT world

The start of 2023 has been rocky too Logan Paul and his NFT escapades. It all apparently started with a multi-part video exposé made by a YouTuber known as Coffeezilla (whose real name is Stephen Findeisen). In the series, Findeisen chronicles the rise and eventual demise of Paul’s once-popular NFT project CryptoZoo, and provides evidence that Paul and his team may have defrauded investors. After a short spat between Paul and Findeisen, the defendant finally chose the celebrity take responsibilityand promises to pay back 1,000 ETH (around $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 more. With charges mounting and prices for Paul’s venture still falling, collectors are caught in the crossfire. The question has now been raised: How does the NFT space proceed from here?

Summary of Logan Paul’s NFT influence

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 in Web3. In 2021, Paul emerged as an apparent advocate of blockchain technology and culture, quickly making waves by collecting expensive and influential NFTs from increasing projects. But not long before, his name took a big hit by being tied 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 via a humorous, South Park-inspired character. Paul even said he was “all in” on the coin via a Twitter post. Yet, throughout this campaign, Paul failed to mention that he had it actual helped create the project. Furthermore, Paul received a significant amount of the token supply (somewhere around 120 trillion, according to some sources) before the launch.

The coin turned out to be a classic pump-and-dump, with Paul and those around him promoting it to increase its value before selling off the shares and letting the coin crash and burn. Shortly thereafter, Paul distanced himself from the project and others who helped orchestrate it. The whole debacle was widely publicized, and even led to a subsequent revelation from Findeisen.

While Paul was never charged with the alleged fraud, NFT enthusiasts condemned his actions. Some even used blockchain analysis tools to find the influencer’s crypto wallet to determine how much he took out of the Dink Doink ecosystem. It turned out to be in excess of $100,000, and although this evidence was never confirmed to point directly back 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 first tarnishing of Paul’s NFT reputation. While other projects, such as Liquid Marketplace, further soured Web3’s attitude towards Paul, CryptoZoo was a completely different beast.

The CryptoZoo fiasco

In the fall of 2021, just a few months after Dink Doink, Paul started promoting his own NFT project, CryptoZoo. The venture was apparently inspired by Pokémon and marketed by Paul as “a really fun game that makes money.” Collectors could buy NFT eggs and hatch hybrid animals depicted from photoshopped images of penguin sharks, duck dogs, etc. From there, users could breed these hybrids with others to produce increasingly rare NFTs. The system felt like Axie Infinity, but with the overarching theme of profitability through peer-to-peer NFT trading and passive play-to-earn mechanics.

Just like other popular PFP projects released throughout 2021, CryptoZoo apparently bit off more than it could chew and the game never materialized. Although Paul reportedly put $1 million of his own money into the game’s creation, and the first 10,000 NFTs (priced at 0.1 ETH each) sold out, the team leading the effort seemed to keep hitting roadblocks. They announced delay after delay until months had already passed with next to nothing to show for it.

As time went on, it began to feel as if Paul had once again distanced himself from one of his projects, with his subsequent NFT efforts, 99 Originals, which will soon be top of mind for its Web3 followers. 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 first stirred the pot by publishing his three-part series. Chronicling the supposed strife and discord between the CryptoZoo founders and the many promises made to the project’s collectors that the developers never followed through on, Findeisen’s long series seemed to come as the nail in the coffin for Paul’s supposed passion project.

CryptoZoo Lawsuit and the Importance of Arbitration

On February 2, 2023, attorneys from Ellzey & Associates and attorney Tom & Associates filed a lawsuit seeking class action certification 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 led in part by prominent attorney and YouTuber Tom Kherkher — better known by his handle, AttorneyTom.

The 26-page official archive paints a detailed picture of Paul and co. apparently turning its back on CryptoZoo investors, claiming that “Defendants marketed CryptoZoo NFTs to buyers by falsely claiming that buyers would later receive benefits in exchange for transferring cryptocurrency to purchase CryptoZooNFTs.”

According to Kherkher, who posted a 10-minute video outlining the lawsuit, CryptoZoo’s terms and conditions contained two main clauses that could affect a victim’s ability to pursue legal action: the first is a forced arbitration clause and the second is a 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 prohibits victims from coming together as a group to bring legal action. Essentially, if you bought eggs or zoo tokens, you signed away your rights to sue CryptoZoo in court.

So how were Ellzey & Associates and attorney Tom & Associates able to help plaintiffs bypass arbitration and file class action lawsuits? According to Kherkher, just because a clause exists within the terms and conditions does not necessarily make it enforceable.

“In fact, I think there are quite a few terms and conditions in the CryptoZoo agreement that I believe are unenforceable,” Kherkher said in the YouTube video. Although 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 legal point of contention in recent years, and the US House even passed a bill banning arbitration agreements in March 2022. Although this appears to have had no effect, judging by the legal efforts of Kherkher and others. on CryptoZoo’s terms and conditions set in September 2021.

What NFT collectors should consider moving forward

Again we ask: How does the NFT space continue from here? For those affected by CryptoZoo, waiting for a possible settlement – ​​either from the lawsuit or from Paul’s pockets – may prove to be the only solution. But there is a bigger problem here; the question of accountability, and it goes far beyond CryptoZoo.

Due to many factors, including the lack of regulation in Web3, everyone from new enthusiasts to seasoned trading veterans have fallen victim to scams over the years. While legal action has been taken against a long list large-scale NFT workcrypto exchanges and other Web3 empires that have come under scrutiny from the SEC, bad actors continue to flourish on the blockchain.

Of course, things are constantly changing, and the rise of SEC investigations, the rise of crypto bills, and even lawsuits involving intellectual property undoubtedly lead the way toward regulation. But for those holding CryptoZoo eggs and considering selling for a big loss just to put the debacle behind them, salvation still seems a long way off.

Amidst all the drama, however, perhaps a lesson has been learned: while major influencers often appear to be a benevolent force ready to help drive mainstream adoption, they can just as easily set Web3 back by undermining the legitimacy of NFT and blockchain technology.