Blockchain investigator ZachXBT has been sued for defamation by an individual accused of fraud, according to a June 16 social media post. Jeffrey Huang, known on Twitter as MachiBigBrother, accused ZachXBT of damaging his reputation through false allegations.
MachiBigBrother also issued an announcement that he is suing Chain Sleuth. ZachXBT responded to the lawsuit calling it "baseless" and an "attempt to stifle free speech." He promised to "fight back" against it.
In a thread responding to his own post, ZachXBT linked to the Medium post that was accused of defamation. Titled: 22,000 ETH Stolen and More than a Dozen Projects Failed: The Machi Big Brother (Jeff Huang) Story, the article accused Huang of launching "more than 10 failed pump and dump token and NFT projects," including money management service Formosa Financial.
One of the claims in the article is that Formosa Financial co-founder George Hsieh withdrew 11,000 Ether, From the project’s vault: “Formosa Financial made two withdrawals of 11,000 ETH from Formosa Financial’s treasury wallet on June 22, 2018, and things got worse. Unbeknownst to the investors, co-founder George Hsieh, as sole director of the company, Execute on both sides by pushing for a stock repurchase himself.
Hsieh then left the project, leaving other officials in charge, the article said. According to ZachXBT, the funds that emerged from the treasury were sent to a number of other wallet accounts shortly after, including one that also received funds from the Ethereum name service domain harrisonhuang.eth.
Combined with other blockchain data, ZachXBT concluded, “These addresses are associated with Jeff Huang/Mithril.” ZachXBT blamed Jeff Huang for running out of funds, noting, “This chart shows the address that Jeff and George made in June 2018 ETH from ang el /private equity funds flowed into the multisig before the 11,000 ETH was withdrawn twice on the 22nd.” Represented Jeffrey Huang in the Austin Division of the US District Court for the Western District of Texas on June 15. In it, Huang’s attorney asserts that h is client did not withdraw funds from the Formosa Financial program, stating:
"Not only did the plaintiff not misappropriate funds from the Formosa Plastics project, but he never controlled any funds from the Formosa Plastics project, so misappropriation is impossible. In fact, based on information and belief, the defender is well aware that, as an Outside of the Formosa Plastics financial project Advisors, Plaintiffs have no direct access to the allegedly stolen funds in the first place."
Additionally, Huang's legal team claimed that the project's founders were likely the ones who stole the ETH from the treasury, as ZachXBT's arguments “failed to account for the more likely and obvious explanations, which are company insiders rather than outside advisors such as Plaintiff coordinated the transfer."
The suit also claims that ZachXBT made money from donations due to his work as an on-chain detective, which is allegedly the real reason he published the article. In a June 16 Twitter post, ZachXBT denied the allegations, saying Huang was trying to " silence" him. ZachXBT said: "It's disgusting to see that happen, but I know it's going to happen someday because sometimes the price of telling the truth is that people don't like what you say."
ZachXBT has previously revealed data on many different crypto scams and exploits. On June 10, he uncovered activity related to $1 million in cryptocurrency lost through a Twitter phishing scam. On June 4, he revealed an estimated $35 million in d amages from the Atomic Wallet app's breach.
