Yesterday, Jeffrey Huang, known as crypto whale ‘Machi Big Brother,’ announced that he had dropped a defamation lawsuit against pseudonymous blockchain detective ZachXBT that alleged the former had embezzled 22,000 ETH from failed cryptocurrency projects. Huang, a Taiwanese music celebrity, made the announcement on X (formerly known as ‘Twitter’):
I am withdrawing my defamation suit against @zachxbt.
Zach has many times in the past been of great service to the crypto community and pursuing legal action against him was a last resort but not the right path.
I appreciate that Zach has made important amendments to his…
— Machi Big Brother (@machibigbrother) August 14, 2023
ZachXBT made his own announcement, saying that he was glad that he and Huang could come to a resolution. In his post, he expressed gratitude for the support of the Web3 community, who had come to his aid, providing for legal funds. He noted that he will begin the process of returning any unused funds soon.
The lawsuit stemmed around an article published in 2022 titled “22,000 ETH Embezzled and Over Ten Projects Failed: The Story of Machi Big Brother (Jeff Huang).” As part of the agreement reached between Huang and ZachXBT, certain details of the article have been edited or changed, including various references that could implicate Huang in criminal activity.
In the original article, ZachXBT alleged that Huang had embezzled funds from numerous crypto projects, including Formosa Financial, a crypto management firm. In the original article, Huang’s projects were said to include pump-and-dump schemes, a notorious practice in the crypto industry. Since the editing of the article, the language has changed to ‘projects with wild speculation.’
David vs. Goliath, and a (Mostly) United Crypto Community
The lawsuit, filed in a Texas court two months ago, startled the crypto community. ZachXBT, Web3’s most well-known sleuth, had created a reputation of honesty and integrity in an industry full of scammers. Single-handedly it seemed, he had exposed countless projects that had misappropriated user funds. People valued his contributions.
When ZachXBT drew attention to the lawsuit on X, he framed it as an attempt to suppress free speech. Huang, a powerful figure in Taiwan and worth quite a bit of money, was trying to intimidate the little guy through legal proceedings. And those proceedings wouldn’t be cheap.
The blockchain detective quickly set up a wallet for legal funds, estimating that the legal fees would be around $1 million. The crypto community responded. Soon, donations were pouring in, including from some top figures like Binance’s Changpeng ‘CZ’ Zhao, Kraken’s Jesse Powell, and Justin Sun, the founder of Tron.
In a bear market during which some divided communities fought over floor prices, one thing was for certain: Most of the cryptocurrency space had ZachXBT’s back, and they showed their support with their wallets.
Evolving Legal Landscape of Web3
The lawsuit against ZachXBT shows the importance of investigative reporting in the space, as well as the evolving legal landscape of Web3. In an industry rife with scams, copycat NFT collections, and a meme culture, it can be difficult to differentiate between what is a well-intentioned project that fails and something with worse intentions.
One of the lawsuits that we have followed here at Rarity Sniper has been Yuga Labs v. Ryder Ripps, et al, in which the biggest NFT company around accused two influencers of creating a copycat BAYC collection and deliberately deceiving customers of what they were buying. Ryder Ripps and a Web3 influencer known as Pauly claimed a ‘free speech’ defense and said their copycat collection was satire.
The courts did not agree.
And, even further, some NFT scams are reaching the ears of enforcement agencies. Recently, a criminal complaint was unsealed in New York wherein an NFT developer was charged with defrauding investors of $2.9 million after promising various benefits for buying into his collection but withdrawing the funds for his personal use.
As the NFT landscape evolves, the court system will play a role and Rarity Sniper will be here to report back on any major cases.
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