A new class-action lawsuit has accused CryptoZoo, the NFT project, and Logan Paul, the famed internet personality, of operating a ‘rug pull’ scam.
CryptoZoo was announced back in September 2021 and had been marketed as an NFT-based game that claimed to be an autonomous ecosystem.
It was designed to allow virtual Zookeepers to purchase exotic animals, or even hatch them from eggs, and trading and sell them on the blockchain.
The lawsuit was filed in the Western District of Texas and a District Court filing showed that the defendants have been accused of executing a ‘rug pull’.
It alleged that they had used Paul’s online following for promoting CryptoZoo’s products to people who were not familiar with digital currency products.
This had driven tens of thousands of people to purchase CryptoZoo NFTs. A ‘rug pull’ scam has become quite a common occurrence in the crypto space.
It involves a crypto developer raising funds for a new NFT line or token and promising consumers certain benefits, but then they abandon the project and do not deliver the benefits that were promised.
But, they do retain the funds raised from the customers fraudulently.
According to the accusations, CryptoZoo NFTs had been marketed to purchasers by the defendants. They had claimed to offer rewards, benefits, and exclusive access to other crypto assets in the future.
Likewise, they had also promised to provide access to an online ecosystem for using and marketing these NFTs.
The filing stated that customers were not aware that the game did not exist or was not functional and the digital currency market had been manipulated by the defendants for the Zoo Tokens for their own benefit.
The filing also alleged that not long after the defendants had sold all their NFTs, they had then transferred the funds to wallets that were under their control.
Logan Paul and CryptoZoo
27-year old Paul’s YouTube channel has a total of 23 million subscribers, which makes him one of the biggest stars of the platform.
Other than Paul and CryptoZoo, the other defendants that have also been named include Ben Roth, Ophir Bentov, one of the founders of CryptoZoo, Jake Greenbaum, lead developer of CryptoZoo Eduardo Ibinez, Paul’s manager Jeffrey Levin and his assistant, Danielle Strobel.
The lawsuit was filed after Paul had begun to recently take some accountability for recovering the losses that investors had suffered due to CryptoZoo.
Last week, the online star announced a rewards program worth $1.3 million on Twitter for disappointed players.
He also apologized to CoffeeZilla, a renowned crypto YouTuber who had posted several videos in which he had criticized Paul for his affiliation with CryptoZoo.
This is not the first time that mainstream celebrities have been scrutinized for their investment in the promotion of NFT projects.
Truth in Advertising (TINA), a US consumer watchdog group, sent notices to 17 celebrities in August 2022 for the promotion of NFTs without making the appropriate disclosures.
These included DJ Khaled, Paris Hilton, Eva Longoria, Gwyneth Paltrow, Snoop Dogg, Tom Brady and