Logan Paul accused of misleading fans over crypto investments

Logan Paul built a worldwide following as an internet celebrity by uploading short video clips, first to the now-closed platform Vine, and then on YouTube.

About three years ago, Paul’s videos began mentioning cryptocurrency (crypto, as it is commonly known) more and more.

Crypto is a form of digital money that uses secure technology to work, without the need for a central bank.

In 2021, Paul promoted a series of extremely high-risk crypto tokens called “meme coins”.

These are usually inspired by internet jokes or memes and are supported by online communities. Meme coins have no other real purpose other than to be traded and, since they have no intrinsic worth, their value can - and often does - drop to zero.

Paul extolled the virtues of an Elon Musk-themed meme coin known as Elongate. “Elongate made me rich. Elon baby let’s go!” Paul announced in a video clip to Maverick Club, his subscription-only fan club.

Following this namecheck, the price of Elongate rose by over 6,000% to an all-time high. It then remained at that price for a few hours before it crashed.

We cannot be sure of Logan Paul’s intentions when he released his clip. However, it seems likely that his mention of Elongate affected its price.

Tech journalist Will Gotsegen says crypto is a market driven to some extent by social media and influencers: “A big guy with a lot of influence... someone like Logan Paul, buys a tonne of crypto and tells their followers about it. They're going to buy it too.”

In the past few years, a number of celebrities have run into legal trouble for promoting crypto to followers without disclosing that they had vested interests.

Kim Kardashian was fined $1.26m (£1m) in 2022 for promoting a token called EthereumMax on her Instagram account.

According to Gary Gensler, the head of the Securities and Exchange Commission (SEC), the body policing the US investment industry, if a celebrity is promoting a particular crypto token, they are “supposed to tell you if they get paid, how much they get paid, whether they own the tokens, whether they made money on the tokens, whether they actually know something about the project”.

Logan Paul is now facing a lawsuit concerning his next venture in crypto - CryptoZoo.

This was marketed as an online trading card game, but instead of cards, CryptoZoo was to use NFTs (non-fungible tokens) - collectible pieces of digital art that can have a value of their own.

To play CryptoZoo, it was necessary to buy a cryptocurrency called Zoo Token, that could then be used to buy NFT “eggs”.

These eggs were supposed to eventually hatch into NFT “animals” that would breed and give birth to NFT “hybrid animals” with names like penguin-shark and panda-fin.

Paul’s team claimed these hybrid animals would somehow make participants money by passively generating more Zoo Tokens.

“It’s a really fun game that makes you money,” he told his audience shortly ahead of the launch in September 2021.

CryptoZoo attracted about $18.5m (£14.3m) in investment.

Rueben Tauk - a 21-year-old from north-east England - was among the Logan Paul fans who bought into CryptoZoo.

“I was really excited to be part of something that he was doing.”

However, the game was beset by problems from the moment it was released.

“We were given certain expectations about features that would be released,” Rueben told us. “A lot of the time those features wouldn’t work.

“After a certain point, you start to realise that something’s wrong.”

The value of the Zoo Tokens and the eggs started to plummet. Rueben says he personally lost £33,000.

At least 130 investors are now involved in a lawsuit against Paul (Rueben is not one of them). They claim they lost about $4.2m (£3.25m).

The lawyer behind the claim, Tom Kherkher - himself a popular YouTuber on legal affairs - says the failure to deliver the game forms only part of the case.

He says leaked messages reveal Paul and his team were involved in a “stealth launch” of the Zoo Tokens, allowing them to quietly buy in at a low price.

“The team appeared to agree that they can begin selling once the total value of all the Zoo Token in circulation hits $200m [£157m],” he says.

“If you had that document with that exact verbiage issued by a CEO of a publicly traded company, they would be charged with fraud in two seconds. That is insider trading.”

Paul has repeatedly denied any wrongdoing relating to CryptoZoo. Instead, he has laid the blame on other members of the team whom he also says failed to deliver the promised features.

Earlier this year, Paul announced a partial compensation scheme for disappointed investors. He promised to refund people who had bought the NFT eggs, but only if they agreed not sue him for anything relating to CryptoZoo.

Paul is also bringing a libel claim against one of his online detractors in the USA, for claims made about his motives.

Logan Paul’s immense popularity depends on his fans, and shows little sign of declining.

In recent years, Paul has turned his hand to boxing and wrestling, as well as launching the drinks company Prime, with British influencer KSI.

The product became notorious for its viral launch - with only a limited stocks made available, Prime spawned a re-sale market with bottles being advertised for hundreds of pounds. It was a testament to both Logan Paul and KSI’s influence over their primarily young audience.

However, for at least one fan, his image has been tarnished for good.

“Once you listen to someone and trust what they’re saying and they betray that trust,” says Rueben Tauk, “their words don’t mean anything to you any more.”

Additional reporting by Ben Milne and Daisy Bata