Famous Internet personality Logan Paul and the NFT CryptoZoo project have been accused of engaging in a “rug pull” in a new class action lawsuit.
Announced in September 2021, CryptoZoo was marketed as an NFT-based game and touted as “a self-contained ecosystem“that would allow virtual ZooKeepers to buy, sell and trade exotic animals on the blockchain, hatching them from eggs at the time of purchase.
In a complaint filed in the District Court for the Western District of Texas, it is alleged that the defendants “performed a ‘rug pull’“, promoting CryptoZoo’s products with the help of Paul’s online customer base “to consumers unfamiliar with digital currency products, leading to tens of thousands of people” purchasing them.
We have officially filed a class action lawsuit in the Western District of Texas against Logan Paul et al. for the CryptoZoo fiasco. (This is in addition to the numerous cases heading to arbitration on the matter.) pic.twitter.com/BIC5v63TGZ
AttorneyTom (@attorney_tom) February 2, 2023
A “rug pullover“Rug pull” is a familiar way of describing when a crypto-currency developer raises funds, for example for a new token or NFT line, promising certain benefits to consumers, but then the developers abandon the project and fail to deliver the promised benefits, while fraudulently keeping the buyers’ funds.
According to the charges, the defendants allegedly marketed CryptoZoo NFTs to buyers, claiming that they would receive benefits, rewards and exclusive access to “other crypto-currencies at a later date,” as well as support from an online ecosystem to use and market these NFTs.
The filing went on to state that “unbeknownst to the customers, the game did not work or never existed, and the defendants manipulated the digital currency market for Zoo tokens to their advantage.“
In addition, the filing alleged that shortly after completing the sale of all of their NFTs, the defendants then transferred the money to portfolios controlled by the defendants.
Logan Paul and CryptoZoo
Logan Paul, 27, currently has over 23 million subscribers on his YouTube channel, making him one of the platform’s biggest stars.
The list of other defendants includes Danielle Strobel, Paul’s assistant, Jeffrey Levin, his manager, Eduardo Ibanez, CryptoZoo’s lead developer, Jake Greenbaum, one of CryptoZoo’s founders and Ophir Bentov and Ben Roth.
The lawsuit comes as Paul has begun to take responsibility for recovering losses suffered by CryptoZoo investors.
Last week, the online star took to Twitter to announce a $1.3 million reward program for disappointed players, and also apologized to popular crypto YouTuber CoffeeZilla, who had posted a number of videos criticizing Paul for his involvement in the CryptoZoo situation.
My 3-step plan for CryptoZoo, including a $1.3M rewards program for disappointed players.
Logan Paul (@LoganPaul) January 13, 2023
This is not the first time that mainstream celebrities have come under scrutiny for their involvement in promoting NFT projects.
In August 2022, the U.S. consumer watchdog group Truth in Advertising (TINA) put seventeen high-profile celebrities on notice for allegedly promoting NFT projects without proper disclosures.
Among those cited are Gwyneth Paltrow, Eva Longoria, Floyd Mayweather, Tom Brady, DJ Khaled, Snoop Dogg and Paris Hilton.