Paperclip File Not Found Error
Ok I managed to solve it.
It was a problem with Cocaine. Seems paperclip has a dependency on cocaine that only says it must be Cociane > 0.02. The latest version of Cocaine 0.4.2 (at the time of this writing) has a new API which is not backward compatible. You need to downgrade to Cocaine 0.3.2.
Simply put this in your Gemfile before paperclip:
gem "cocaine", "0.3.2"