On-chain sleuth ZachXBT, who has gained a reputation for his expertise in investigating blockchain fraud, is now facing a lawsuit for allegedly damaging the reputation of accused fraudster Jeffrey Huang.
ZachXBT Faces Legal Action Over Libel Claims
Per various social media posts, ZachXBT, an investigator of blockchain, has been sued for defamatory remarks by one of the individuals he accused of fraudulent activities. The plaintiff, Jeffrey Huang, who goes by the name MachiBigBrother on Twitter, claims that ZachXBT tarnished his reputation by leveling baseless accusations against him.
MachiBigBrother released a statement about filing a lawsuit against the on-chain investigator. ZachXBT, in response to the legal action, referred to it as “groundless” and an effort to suppress free speech.
In a distinct thread related to his previous post, ZachXBT shared the purported defamatory Medium article. The article claimed that Huang had created over ten failed pump-and-dump and non-fungible token (NFT) projects, including the treasury management company Formosa Financial.
According to the article, Formosa Financial co-founder George Hsieh withdrew 11,000 ETH from the project’s treasury without informing investors. The report added that this action occurred twice on June 22nd, 2018.
The company’s sole director, Hsieh, allegedly executed a share buyback without transparency or approval from other parties involved. As a result, the situation hurt Formosa Financial.
The article stated further that Hsieh departed from the project, leaving other officers responsible for the consequences. ZachXBT noted that the drained funds from the treasury were transferred to various wallet accounts, including one that previously received money from the ENS domain harrisonhuang.eth.
After analyzing other blockchain databases, ZachXBT inferred that these addresses were linked to Mithril/Jeff Huang. ZachXBT held Jeff Huang responsible for the fund draining, stating that the chart showed the influxes of angel/private round funds into the multisig account before Jeff and George withdrew 11,000 ETH on June 22nd, 2018.
Lawsuit Filed in Texas Court Over Alleged Embezzlement
Meanwhile, a complaint was filed on behalf of Jeffrey Huang in the US District Court for the Western District of Texas, Austin Division, earlier this week. Huang’s attorney said his client did not withdraw funds from the Formosa Financial Project.
The attorney further noted that Huang could not access the funds, making embezzlement impossible. The attorney added that the defendant knew Huang was only an external advisor to the project and did not have direct access to the allegedly stolen funds but still made false claims.
Huang’s lawyers argued that the individuals who initiated the theft of ETH from the project’s treasury were probably the founders themselves. They dismissed ZachXBT’s arguments, stating that it was more plausible that the company insiders planned and executed the transfers rather than an external advisor like their client.
In addition, the lawsuit accused ZachXBT of making money through donations for his work as an on-chain investigator, suggesting that his motive for publishing the article was financial gain. However, ZachXBT refuted the allegations against him.
Using a Twitter thread, he accused Huang of attempting to silence him. He further mentioned that he anticipated such a response from Huang because revealing the truth leads to clashes with those who dislike the information.
