Chain sleuth ZachXBT sued for defamation after claiming plaintiff drained project funds

Blockchain investigator ZachXBT has been for follow-up for defamation by one of the people he accused of fraud, according to a June 16 social media post. According to the post, Jeffrey Huang, known as “MachiBigBrother” on Twitter, accused ZachXBT of damaging his reputation through false allegations.

MachiBigBrother too job an announcement that he is chasing the chain detective.

ZachXBT responded to the lawsuit by calling it “baseless” and “an attempt to chill free speech.” He pledged to “fight back” against this.

In a thread responding to his own post, ZachXBT linked to the Medium post that it accused of being defamatory. Titled “22,000 ETH Hijacked and Over Ten Failed Projects: The Story of Machi Big Brother (Jeff Huang),” the article accused Huang of launching “more than 10 failed pump and dump tokens and NFT projects,” including cash management service Formosa Financial.

One of the claims made in the article is that Formosa Financial co-founder George Hsieh withdrew 11,000 Ether (ETH) from the project’s treasury:

“Formosa Financial got worse when two withdrawals of 11,000 ETH each were made from Formosa Financial’s treasury wallet on June 22, 2018. Unbeknownst to investors, co-founder George Hsieh acting as the sole director of the company , pushing a stock buyback through itself, executing on both sides.

The article claimed that Hsieh later left the project, leaving other officers in charge. According to ZachXBT, the funds taken from the treasury were soon after sent to numerous other wallet accounts, including one that also received funds from the ENS harrisonhuang.eth domain.

In combination with other blockchain data, ZachXBT concluded that “these addresses are linked to Jeff Huang/Mithril”. ZachXBT blamed Jeff Huang for the fund drain, saying, “This chart displays the angel/private fund ETH inflows into the multisig before the two withdrawals of 11,000 ETH were made by Jeff and George on June 22, 2018 .”

Related: The Project Takes Off With $31.6M In Alleged Exit Scam

Cointelegraph obtained the lawsuit filed June 15 on behalf of Jeffrey Huang in the United States District Court for the Western District of Texas, Division of Austin. In it, Huang’s lawyer claims that his client did not drain funds from the Formosa Financial Project, stating:

“Not only did the plaintiff not embezzle funds from the Formosa Financial project, but he never had control of Formosa Financial funds, which makes embezzlement factually impossible. Indeed, based on information and of beliefs, Defendant fully understood that as a mere outside advisor to the Formosa Financial project, Plaintiff would have no means of directly accessing the allegedly stolen funds in the first place.”

Additionally, Huang’s legal team claimed that the project founders were most likely the ones who stole the ETH from the Treasury, as ZachXBT’s arguments “miss the much more likely and obvious explanation that company insiders, rather than an outside advisor like Requestor, coordinated to orchestrate the transfers.

The lawsuit also claims that ZachXBT makes money from donations through his on-chain detective work, which he claims is the real reason he published the article.

In his June 16 Twitter feed, ZachXBT denied the allegations, saying that Huang was trying to “silence” him. “It’s sickening to see it come to this,” ZachXBT said, “but I knew one day it would happen because the price of telling the truth is that sometimes people don’t like what you say. “

ZachXBT has already revealed data on many different crypto scams and exploits. On June 10, he identified activity associated with $1 million worth of crypto drained by phishing scams on Twitter. On June 4, he revealed estimates that $35 million had been lost due to an exploit in the Atomic Wallet app.