Although most might be unaware, the first ever NFT to ever grace blockchain technology with its presence was created as far back as 2014. Titled ‘Quantum’, the simple digital graphic of an octagram became the first non-fungible asset to be tokenized via a blockchain. Its non-fungible nature sets NFT apart from a crypto asset like cryptocurrency: cryptocurrency is not unique in the same way a dollar bill is not unique. A dollar bill can be replaced, it can be traded and exchanged with one another, in the same way one Bitcoin is interchangeable with another. An NFT however is always a unique asset, which is why it is often described and invested in, in terms of a collectible, or a piece of art. Its value depends on public perception and has no insurance of monetary value attached to it. An encryption in the form of a unique digital signature sets one NFT apart from another.
The ability to create rare or one-of-a-kind assets via a very famously secure ledger system opens many doors for those interested in rare collectibles, especially art. The technology opens up interesting new avenues for creating assets, owning them, and holding assets for their speculative value. This has the potential to impact both digital as well as IRL industries. In the case of physical assets for example, NFTs can be used to hold an asset, share its ownership or transfer ownership completely without the mediation of any other service provider or third party.
However, market interest in the speculative potential of NFTs have outweighed all other possible uses of NFT. Among others, this has led to many incidents of fraud being perpetrated upon unsuspecting investors. Although not the largest of many, many incidents, Logan Paul’s CryptoZoo fiasco is among the most notable for the internet interest it managed to attract during its short lifespan, and its drawn out demise.
‘A fun game that earns you money’
2021 was a time like no other in world history: it was also a time where digitally owned and transferred asset ownership captured the imagination of the market the most. The boom in the market for NFT saw a steady influx of newcomers looking to capitalise off of this new found interest. This interest however seemed to be solely focused on the speculative potential of digital art – as this interest gained mainstream popularity, it saw a number of celebrities from A-listers to internet influencers getting involved. This included (in)famous YouTube celebrity and WWE wrestler Logan Paul. Logan Paul was first notably involved in the cryptocurrency space with the joke coin ‘Dink Doink’ for the ‘memes’. His next noteworthy foray into crypto space was in 2021. This was a project to create an NFT mining game, a personal passion project to create an earn-as-you-play NFT game, much like CryptoKitties.
The game
The way in which the CryptoZoo would work seemed simple enough in its description – certainly reminiscent of CryptoKitties and the video game Pokemon. The first stage of the game was based off of Zoo Eggs, which could be bought using CryptoZoo tokens, which were both the in-game currency as well as a cryptocurrency on its own. The NFT eggs bought by each player would ‘hatch’ after a certain time period into Zoo animals (two different animal NFTs per egg), that could be bred to create hybrid animals (each their own NFT). The Zoo token value of these hybrid animals varied depending on the rarity of the breed created. The animal hybrids also generated a given value of passive income daily, which could either be redirected towards buying more Zoo eggs or cashed out of the game. Players who wanted, at any point, to ‘cash out’ their initial Zoo token investment in the game could do so by ‘burning’ their hybrid animals, which released both the passive income it had generated as well as the original price paid for it.
The concept of the game was not a new one. However, according to Logan Paul, it added value over other competitors in the market because the NFT assets used in the game; or more specifically, the animal hybrid NFTs, were all manually created by digital artists, as opposed to being randomly generated. This was supposed to give the NFTs an intrinsic value in addition to their Zoo token value.
1st launch: releasing the ‘eggs’
The NFT launch had what was almost a soft launch before the game was made public. This was when the crypto ‘eggs’ were released for sale to the public. Buying the eggs was not a simple process: buyers had to use whatever cryptocurrency they had at their disposal (or first translate their money into crypto) to purchase CryptoZoo tokens, which could then be used to purchase Zoo eggs. The complicated process however does not appear to have deterred interested buyers: 2.5 million US dollars worth of eggs had been purchased within the first 24 hours. This was before the game had even been launched. Logan’s audience were clearly prepared to buy into his promise.
The success of the Egg launch also saw the value of the CryptoZoo token skyrocket, and daily trading volumes in the days that followed were in the tens of millions of dollars.
‘Handmade art’
CryptoZoo released a series of images of the NFT hybrid animals that would be part of the promised game as teaser content in the months leading up to the official launch of the game. Unfortunately, these images failed to create the hype expected: they were in fact met with significant lashback as many realised that the pictures were just Adobe stock images which had been merged together. It was a far cry from the manually made, digital art that Logan Paul had promised his audience. The launch date, the third of November, passed without incident: so much so that even the game was not functionally launched at all.
The emperor’s new game
CryptoZoo had been set to launch on the third of November. The game was launched: to a certain extent. User feedback quickly flooded the internet, reporting that the passive yield functionality of the hybrid Zoo animals did not work, and indeed had never even been written into the blockchain contract between ‘players’ and the company. On the sales side of things, it came out that some players had been allowed to buy Eggs using Ethereum without having to convert to CryptoZoo tokens, a fact which left many players/investors enraged. The Eggs that had been purchased via Ethereum also proved to be unhatchable, rendering the entire purchase useless.
As the news of the dysfunctional game made their rounds on the internet, the price of CryptoZoo tokens fell by close to 63% in the 24 hours that were to follow. Logan Paul fell completely silent on the subject even as he made his regular appearances at events and at various shows and podcasts. This silence would last for well over a year – until public outrage, spearheaded by Houston-based YouTuber/financial investigator Stephen ‘Coffeezilla’ Findeisen became unbearable.
A tale of betrayal unearthed
The investigations carried out and made public by Coffeezilla unearthed a convoluted tale of a project group consisting of project salesmen such as Logan Paul who lacked the tech skills to deliver on the promises he made and individuals with histories of fraud, who had had no intention of delivering on the promise of a functioning NFT-based game. The crypto journalist also accused Logan Paul of having had a ‘stealth sale’ of CryptoZoo tokens for company insiders, friends, and family prior to ever releasing the coin to the public. If true, this would be in direct violation of SEC’s pre-sale regulations. These accusations were backed by blockchain analysis by the YouTuber. Logan Paul retaliated by threatening a defamation lawsuit against Coffeezilla, which he is yet to carry out.
The members of the project team were also revealed to have attempted to backstab each other in their efforts to capitalise on the unfair advantage they had over the general public. The outcry that this investigation created finally prompted Logan Paul to speak out and defend himself in a now deleted YouTube Video. In it, he also detailed a three-point plan to refund the victims of his ‘project’. He first promised that he and his manager would destroy their CryptoZoo tokens to ensure that there would be no way in which they could profit from the token in the future. While the wallet has indeed been inactive since the March of 2022, reports cite sources still showing that they had not, in fact, been destroyed.
In his ‘apology’ video, Logan Paul also made a very public commitment to pay out 1.8 million US dollars to reimburse those who had bought into his project. This payment is also yet to materialise. Paul’s last promise was to carry out his initial promise to his investors of producing the NFT game he had promised them. Sadly, the project seems to be dead in the water, and has always been so.
Lawsuits against Logan
A class action lawsuit was brought against Logan Paul and five others on his team at CryptoZoo LLC in January this year. The filing was made by one Texas victim, police officer Don Holland. Speaking to local Texas television station, Ellzey & Associates, one of the firms handling the lawsuit on Holland’s behalf made the following statement:
“”Logan Paul and the Co-Defendants promised a product — this NFT ecosystem, the ability to change animals — and promoted the product as an investment game that would make the players money. As those words were being spoken to unwitting consumers investing millions collectively in CryptoZoo, there was no product and no solid plan or timeline for completing it. There’s still no product. But all the money the consumers spent in reliance on Mr. Paul’s promotions is still out there in someone’s pockets. We are confident this case will allow us to correct this wrong for Mr. Holland and the other affected class members, despite the defendants’ efforts to bolt on waivers to their website ‘terms and conditions’ ex post facto. That doesn’t work in Texas.”
It is to be hoped that the lawsuit is successful in its mission.
(Theruni Liyanage)