Crypto sleuth ZachXBT raises $1.1 million and counting for legal defense

Donation trail shows signs of Sybil attack by speculators

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Valery Brozhinsky/Shutterstock, modified by Blockworks

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Pseudonymous crypto sleuth extraordinaire, ZachXBT, recently became the target of a defamation lawsuit in US District Court in Texas. To mount a defense, he appealed to crypto Twitter for help raising the necessary funds for attorneys, which he estimated to exceed $1 million.

Less than three days and over 18,000 Ethereum transactions later, ZachXBT has raised $1.1 million, with more coming in all the time.

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Just over a year ago, ZachXBT published an account of his detailed on-chain forensic investigation into Jeffrey Huang, also known as Machi Big Brother, a Taiwanese-American former musician and tech entrepreneur who was involved in various controversial crypto projects.

Among the allegations was that Huang embezzled 22,000 ether (about $10 million at the time) from Formosa Financial, a startup he co-founded which conducted a private token sale in 2018.

ZachXBT tracked transfers of ether (ETH) from the Formosa treasury to various Binance accounts and wallets, raising questions about their ownership and connections to Huang associates.

Huang, the plaintiff in the defamation suit, seeks a retraction and “monetary damages in an amount to be determined at trial.” The complaint states Huang was falsely accused and that claims over his “supposed criminal conduct are categorically false.”

Huang went on to co-found Cream Finance, a fork of Compound, which was subsequently exploited multiple times for around $186 million in total, and eight other projects through Jan. 2022, some of which failed in days or weeks.

“In so many of Jeff’s projects we see the same [recurring] themes play out: anon teams, forked projects, fresh wallets funded via FTX, and short lifecycles,” ZachXBT wrote.

The lawsuit claims Huang “was not involved with Cream Finance at the time of the hacks,” and more than half of the stolen funds were subsequently recovered.

It suggests that “the ulterior purpose” of the @ZachXBT Twitter account is “to attract financial contributions for [ZachXBT] in the form of purported ‘donations,’ as well as other compensation from websites that publish his work.”

Moreover, Huang’s lawyers claim a “more likely and obvious explanation” for the Formosa treasury’s ether trail is “that company insiders, rather than an outside advisor like [Huang], coordinated to orchestrate the transfers.”

The complaint implies that Lorne Lantz, the Formosa’s chief technology officer, was more likely to be responsible for the transfers and that ZachXBT’s investigation helped Lantz “escape scrutiny for losing Formosa Financial funds under his control,” motivated by his own investment in Lantz’s subsequent project Breadcrumbs — an on-chain analysis tool ZachXBT uses in his work.

Blockworks reached ZachXBT’s attorney, Stephen Palley, for comment, who said “such an argument would be absurd and that Zach’s record speaks for itself.”

“This lawsuit has exposed him to considerable personal peril, including blackmail threats,” Palley told Blockworks.

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Crypto community support for ZachXBT

Many prominent crypto Twitter personalities have rallied around Zach’s cause, including Binance founder Changpeng “CZ” Zhao and artist Beeple.

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Many of the incoming donations are small, some — just a few cents — so small that it is likely the senders are speculating about a potential reward, rather than a genuine interest in ZachXBT’s defense.

Multiple donations in the same minute of the same amount from different addresses on BNB Chain; Source: Zerion

ZachXBT previously offered an NFT as a thank-you to his supporters, which may be encouraging a Sybil attack on a prospective snapshot of donor addresses now.


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