But it is being DISTRIBUTED.

If you made it at home and never distributed it, of course Nintendo can't send their police squads to raid your home and seize it.

But this is being portrayed online and distributed, so it's all into the IP laws.

Fair Use doesn't protect this kind of work. It is hardly a parody or a critique. The intention (yes, intention, we are talking about civil law, so we can interpret by intention, which makes things very murky) of the IP law is to ensure that IPs such as Pokemon, including their individual species and the brand as a whole, are not misrepresented, plagiarized, or unfairly used as a tool by others to make profit.

This work clearly affects the brand image.