Crypto Detective ZachXBT Faces Defamation Lawsuit

NFT trader MachiBigBrother, otherwise known as Jeffrey Huang, has sued ZachXBT, an independent blockchain detective, after the on-chain sleuth published a report last year alleging Huang embezzled tens of millions of dollars worth of crypto.

The lawsuit, filed on Friday in the U.S. District Court for the Western District of Texas, alleges ZachXBT defamed MachiBigBrother, "inflict[ing] serious reputational and monetary harm” on him. ZachXBT faces one count of libel and one count of libel per se, according to the complaint.

"Without any regard for the ruinous effect that public allegations of criminal conduct can produce for the accused individual, [ZachXBT] not only proceeded to publish his defamatory article on Medium.com, he also maliciously promoted the article to his more than 300,000 Twitter followers," MachiBigBrother's lawyer said in the complaint.

MachiBigBrother's lawyer did not immediately respond to a request for comment.

The lawsuit cites an investigation ZachXBT published on his blog and on Twitter in June 2022 alleging MachiBigBrother manipulated crypto markets and embezzled 22,000 ether, worth nearly $38 million at the time of writing.

ZachXBT responded to the lawsuit on Twitter Friday, calling it "a classic David [and] Goliath story."

"My understanding is that Machi[BigBrother] is very wealthy," ZachXBT tweeted. "I am not. He is using his money to try [to] silence me."

In the same Twitter thread, the crypto detective lamented that fighting the lawsuit could cost more than $1 million. He asked his followers to donate crypto to a wallet dedicated to his legal costs.

"I’m asking for your help so this doesn’t happen & the truth survives," he said.

The wallet has racked up almost $95,000worth of crypto donations as of publication time.

The complaint requests the court order ZachXBT to pay “actual and compensatory damages,” in addition to “exemplary damages” of an amount to be determined by the court. It also requests Jeffrey Huang be reimbursed for any legal fees he racks up during the impending legal battle.

ZachXBT will not pause his investigative work as he prepares to defend himself against the lawsuit, his lawyer, Brown Rudnick Partner Stephen Palley, told CoinDesk.

"To my knowledge, our client intends to carry on with his work," Palley said.

He added, "We intend to vigorously defend this lawsuit and protect [ZachXBT] against this attempt to chill his free speech."

ZachXBT skyrocketed to prominence within the crypto community after publishing original blockchain data analyses allegedly exposing the misdeeds of bad actors populating decentralized finance and Web3 spaces. His investigations have helped him amass a following of more than 400,000 users on Twitter and earned him a spot on Consensus Magazine's Most Influential 2022 list.

Billing himself an “on-chain sleuth,” ZachXBT often publishes the results of his investigations in Twitter threads and blog posts on Medium. His detective work has led to real-world arrests and gained so much traction on social media that he was forced to stop accepting community requests to investigate nefarious activities in the crypto sphere last March.

UPDATE (June 17, 2023, 16:35 UTC): Adds comments from ZachXBT's lawyer.