Magistrate Backs Awarding Unpaid Ether Loans and NFT Royalties in Default Judgment

News | July 1, 2024 By:

On Monday, June 17, 2024, Magistrate Judge Allison Claire of the United States District Court for the Eastern District of California recommended that plaintiffs Cody Valjalo and Dylon Valjalo be awarded damages in their breach of contract and fraud lawsuit against Austin Taylor and CLU LLC.

The lawsuit, filed last year, stemmed from a series of loans that the Valjalo brothers provided to Taylor and CLU in 2022 using cryptocurrency like ether, which is native to the Ethereum blockchain. According to court filings, Taylor is a social media personality and entrepreneur in the digital assets and non-fungible token (NFT) industries. CLU was his Florida-based limited liability company.

The Valjalos alleged they first worked with the defendants in 2019, providing digital artwork services. In September 2021, the parties agreed the Valjalos would receive a 40% royalty share on the sales of their artwork. While they were paid for their work, the Valjalos claimed they never received the royalties owed.

In July and August 2022, Taylor solicited multiple loans from the Valjalos totaling around 170 ether (ETH), valued at over $311,000 at the time. Taylor said the loans were needed for business expenses like vendor payments but eventually admitted in January 2023 that he had used the funds for gambling instead and lost the money.

When Taylor failed to repay the loans as promised, the Valjalos filed a breach of contract, fraud, and unjust enrichment lawsuit against him and CLU in October 2023. Neither defendant responded to the complaint or subsequent filings. With defendants in default, the Valjalos then sought a default judgment.

In her recommendations issued Monday, Judge Claire found the Valjalos adequately alleged breaches of contract and fraud. While they did not provide written evidence of agreements, the judge noted oral contracts can be enforceable and defendants waived defenses by not appearing.

Judge Claire recommended awarding the Valjalos the full $339,300 value of the loans, supplemented with over $64,000 in prejudgment interest. Additionally, she backed $46,527 for the Valjalos’ unpaid 40% royalty share relating to sales of their NFT artwork in a project called GoobersNFT.

However, Judge Claire denied the Valjalos’ request for $24,000 in claimed fees for taking over management of the GoobersNFT project in January 2023 after Taylor admitted fraud. She said they voluntarily assumed control with full knowledge of the situation and did not show an arrangement with the defendants for payment.

If accepted by the presiding district court judge, the recommended damages totaling over $450,000 would make the Valjalos whole for the monetary losses alleged from the defendants’ wrongdoings.

Please contact BlockTribune for access to a copy of this filing.