By Steven Asarch
Over the past three years, non-fungible tokens (NFTs) crept their way into the cultural zeitgeist. These NFTs can be pictures, avatars, video game assets, or anything that can be traded and tracked on the blockchain ledger. Basically, the main difference and “value” they have compared to a JPEG is that there is only one specific copy with provenance. Millions of dollars have been funneled into projects with pictures of apes, penguins, robots, and dozens of other randomly-generated meme machines. In 2021, the NFT market reached a market size of $4.36 billion on the backs of hype, FOMO, and the recommendations of content creators.
But the market as a whole plummeted, with most NFTs losing over 90% of their value since their peak, according to Statista. As previously reported by Passionfruit, innuendo, slander, and celebrity can also easily tilt the NFT market, and as such, you see someone accusing a cryptocurrency or NFT project of being a fraud almost everywhere you turn online. Accusations of “scams” are plenty, and they range broadly from intentional deception and “pumping and dumping” stocks to simply foolishly touting bad investments or failing to properly plan a project.
Despite this volatility, influencers have promoted dozens of NFT projects to their millions of followers. Some like brand entrepreneur Gary Vaynerchuk had success—his Vee Friends series of crudely drawn animals still holds value. While others have diminished in value—adult actress Lana Rhoades allegedly earned over $1.5 million for her CryptoStasis NFTs that nose-dived in value after they were released.
But the biggest and arguably most divisive influencer who pushes NFTs is Logan Paul. The eldest Paul brother is no stranger to controversy or speculative markets. His purchases and live streams of 90s Pokemon cards in 2020 contributed to the whole market surging in price. Paul also promoted a “Dink Doink” cryptocurrency in 2021 that he made with some friends, using South Park-style cartoons as a promotional tactic. The cryptocurrency lost over 99% of its peak value. In 2021, he also spent over $2.6 million on 139 NFTs, with the most being $623,000 on an 0N1 Force robot NFT (that is worth around $10 currently).
The 27-year-old also started his own NFT project that he could market to his over 70 million subscribers across YouTube, TikTok, and Instagram. Paul first mentioned his “CryptoZoo” project on an episode of his Impaulsive podcast in August 2021, claiming “my game” would offer “handmade art” and that it would be “a really fun game that makes you money.” It’s unclear how involved—if he was just a figurehead or involved heavily in the day-to-day—Paul was in the project.
The hype was big around CryptoZoo, partially due to the amount of money Paul said was funneled into the project from its start. “We have a massive team behind it and are probably out of pocket like a million just because we think it’s going to work,” Paul said in a video clip from a podcast. Some NFT holders said they spent tens of thousands of dollars investing in the project.
A month later in September 2021, CryptoZoo launched with 10,000 virtual “eggs” that cost around $300 each and would supposedly hatch into an animal that would yield “Zoo tokens” every day. However, NFT holders soon reported that when the virtual eggs hatched, they just showed pictures of animals that didn’t come with a game or mechanism for yielding Zoo tokens. They also didn’t seem to feature handmade art, leading NFT holders to question where the alleged money invested in the project went.
Over the next year, the project disappeared into obscurity. Paul instead moved on to wrestling on WWE and promoting a new “99 Originals” NFT series, where he sold images he took on a Polaroid camera, raising over $2 million.
That was until Stephen Findeisen, known on YouTube to his 2.5 million subscribers as Coffeezilla, in December 2022 released a three-part dissection of what he alleged happened behind the scenes of Paul’s project. Findeisen alleged Paul worked with a series of shady characters, like a coder who was never paid named Zach Kelling, lead developer Eddie Ibanez, and influencer Jake “The Crypto King” Greenbaum who Coffeezilla said made millions cashing out. He also described the art as “a bunch of stock photos from Adobe that have been poorly Photoshopped.”
Findeisen claims in his videos that he found the wallets of Greenbaum and Ibanez sold their allotted tokens before the currency properly launched, making millions of dollars. He provides screenshots of Discord messages and crypto wallet transactions to corroborate his claims. Passionfruit was unable to independently verify the veracity of these screenshots.
Passionfruit reached out to Paul for comment via social media as well as to his publicist and legal contacts listed on IMDb Pro via phone call, inquiring about these allegations. We also reached out to Greenbaum via Instagram and Kelling via Twitter for comment. We did not hear back in time for the publication of this article. We could not locate a contact for Ibanez on social media.
When an influencer promises an investment on their project will soar in value only to disappear with any capital, the Web3 community refers to it as a “rug pull” scam. Accusations of rug pulls often fly, but it’s often unclear and difficult to prove if the founders of NFT projects did cash out for millions at the expense of their followers, and even if they did, if it was premeditated and intentionally malicious.
In Paul’s case, it is unclear what his intentions were, if he intended for the project to fizzle out, what financial gains he made off the project, and what level of culpability he has for the project’s demise. In video clips from podcasts showcased by Findeisen, Paul claims the lead developer of CryptoZoo, Zach Kelling, vanished with the code he made for the project. Kelling wrote in a LinkedIn post that the “devs are still owed over $1 million USD by CryptoZoo and “we quit the project because Logan didn’t pay us for our services rendered.”
There are still the other members who worked on the project and how far their input went is unclear. An archive of the CryptoZoo website from March 2022 says that Ibanez “graduated from MIT, was a hacker, worked for a governmental agency to help track terrorists.” He has since been removed from the page. According to Philidelphia local news site BillyPenn, none of those claims were correct and Ibanez couldn’t stop “embellishing his life story.”
Greenbaum is an influencer who wrote on his Reddit profile that he is “educating the community about investment strategy and undervalued crypto opportunities.” In an interview with Findeisen, Greenbaum claimed he was a “founder” who sold his assets once the project appeared to go South but didn’t say how much he earned.
Paul originally responded to Findeisen’s accusations of “scamming” with venom, releasing a now-deleted video and a still-available episode of Impaulsive where he said the game is still in development and threatened Findeisen with legal action.
In January 2023, Findeisen told Passionfruit that “Logan never filed a suit to my knowledge” and that “he apologized to me, and it’s my understanding he’s making a new statement.”
On Jan. 13, 2023, Paul issued an apology video to those who bought into the project, announcing a “rewards program” where those who purchased eggs could get a refund from his own Ethereum supply, promising over $1.3 million worth of his supply. He also said he was burning all of his tokens to not receive any “financial upside” to the situation.
Paul said he “never scammed anybody, never made any money, and never sold any tokens” but apologized to his community for “how this has unfolded thus far” and said they are conducting an internal audit to find “whoever needs to be held accountable.”
He also thanked Coffeezilla publicly for “catalyzing this,” calling him “not a criminal” and saying, “I am grateful for your work and investigation.”
“$ZOO was not and is not an investment vehicle,” Paul wrote in a post on the CryptoZoo Discord Passionfruit reporters found. “As we conduct our internal exam and audit, we will do our best to ensure a satisfying outcome for all.”
“As far as I’m concerned, refunds [are] the only answer here that makes sense,” Findeisen said. “Given the fact that a lot of people who bought into the game have already sold at a deep loss. Those people have to be made whole. This is Logan’s last chance to make things right.”
What do creators need to know about crypto controversies?
So how do creators and influencers like Paul manage to convince their audiences that an investment is worthwhile? According to Andrew Dillon, a professor studying human responses to technology at the University of Texas, influencers feed their audiences “positive words or success stories,” playing into people’s “confirmation bias.” If you are invested in a personality—either financially or emotionally—you are more likely to believe what they have to say.
“It’s a form of advertising ultimately that plays on our cognitive and emotional biases,” Dillon told Passionfruit. “Humans naturally seek confirmation rather than contradiction.”
Myriam Brouard, a University of Ottawa professor studying NFTs, told Passionfruit a similar story.
“Because NFTs are such a new market, and there are no regulations and no real credible sources of information, customers rely even more on personalities that they know and trust,” Brouard said. “All the people who have been in the space for any period of time have known that [CryptoZoo] was a scam project. … I think that the reason it took so long is that many who purchased into the project were his followers and not people who are savvy about the space. I find it sad when influencers use their clout to take advantage of their followers.”
While it’s unclear what Paul’s intentions were in this case, it appears there have been instances of influencers, especially in the wild Web3 west, intentionally misleading followers toward bad investments for speculative profit. While there has been little legal recourse against bad actors, things are changing in the world of law. In December 2022, the Securities and Exchange Commission (SEC) charged eight influencers who promoted investment advice on Twitter and Discord in a $100 million securities fraud scheme.
As previously covered by Passionfruit, another unrelated, but infamous alleged rug pull the government is now trying to prosecute is Frosties, which lured NFT purchasers with promises of eventual 3D versions of their avatars and a video game, before its founders abandoned the venture. The founders are now facing charges of conspiracy to commit wire fraud and money laundering after reportedly walking away with $1.1 million, according to the Verge.
If you still want to invest in the Web3 space, then it’s important to do your research. Rug pulls and scams are everywhere, and the holders are the ones who end up losing.
“Buying NFTs is a high-risk/high-reward activity, the risks can be financial, functional, emotional, and reputational,” Brouard said. “Very few projects retain any value over time, so this risk is very high.”
According to Brouard, an NFT project worth investing in is “realistic in its goals and promises utility that is exciting for the person investing the money.”
For many, NFT projects are a fun method of engagement and community building for super-fans of artists and creators—as opposed to purely speculative investments. As previously reported by Passionfruit, some promising, community-based, and creator-driven NFT projects have sprung up. For example, cult-favorite creator Ilse Valfré’s NFT project Valfrélandia fulfilled its promises to exclusive community initiatives and rose in value since its launch in May 2022.
When looking into projects, it’s important to look for teams that aren’t anonymous and that can actually fulfill their promises. If it’s a group of shady usernames promising you’ll be able to take shots with Snoop Dogg in the metaverse, then you might want to save your money.
It’s unclear if Paul ever would have given back the money if he hadn’t been called out in the first place. Paul knows how to monetize his audience—his Prime energy drink has been flying off shelves across the world, and his Maverick line of merchandise made “30 to 40 million dollars in sales in its first year,” the influencer said on Impaulsive. He’s built up his brand on audience trust, which in the case of CryptoZoo, he may have wielded a bit wildly.