DEFI

DeFi detective ZachXBT lands! Reviewing the past projects of the big brother and the misappropriation of funds from Baodao Finance, Huang Licheng: Fake news

2022/6/16

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"This is misinformation. If he is not anonymous, I will definitely sue him for defamation," said Brother Huang, a well-known figure in the cryptocurrency industry.

Brother Huang has been involved in the cryptocurrency scene for many years, going through the ICO era, DeFi summer, and NFT craze. He is now a major holder of the Bored Ape Yacht Club (BAYC) series and actively participates in the development of the Bored Ape ecosystem. However, projects associated with Brother Huang often experience significant fluctuations, leading some in the Taiwanese community to jokingly refer to him as the "Big Cutter." In past interviews, he did not seem to mind this nickname. He said, "The cryptocurrency industry is like a martial arts world, and I have also 'defeated' many people in it." He believes that negative evaluations stem from the influence he has gained in this industry.

However, a report released by Twitter personality ZachXBT, known as a DeFi detective, has sparked controversy. Brother Huang has vehemently denied the claims made in the article, calling it misinformation. The article, titled "22,000 ETH Embezzled and Over Ten Projects Failed: The Story of Machi Big Brother Jeff Huang," investigates projects associated with Brother Huang, including the controversial allegation of fund misappropriation in the Taiwan-based "Formosa Finance."

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Below are the key points summarized in the article for reference:

ZachXBT begins by introducing Brother Huang's background as a Taiwanese-American with a music background and alleges that he embezzled funds from "Formosa Finance." Despite his prominent reputation in BAYC, many are unaware of his dark past.

Formosa Financial Incident

ZachXBT stated that in early 2018, politicians Xie Guoliang and Ryan Terribilini co-founded "Formosa Financial" as a blockchain company's asset management platform, raising a total of 44,000 ETH by the end of May that year, equivalent to about $23 million. Investors included Binance, QCP Capital, Lemnis Cap, Block One, Mithril/Jeff Huang, Maicoin, Wilson Huang, Blockstate.

ZachXBT mentioned that at the time, Formosa Financial had stated on its official blog that it would be listed on the top five exchanges before going public, but this content was later deleted.

ZachXBT claimed that Big Brother had hinted at a listing on Binance, but later denied this claim.

There were even "rumors" online that Big Brother had said that they raised so much money because of his reputation and the white paper's merit:

Jeff/Machi bragging how 44,000 ETH was raised because of him – 2019 pic.twitter.com/cAXN04F7Hm

— Influencers Taking Ls (@bestvideosofct) June 17, 2022

In June 2018, Formosa Financial's token FMF was only listed on the decentralized exchange IDEX, and the price of the token plummeted. It was not until September 2018 that they listed on the centralized exchanges IDCM and UEX.

Formosa Financial's Fund Mystery

Three weeks after Formosa Financial's ICO, on June 22, 2018, co-founder Xie Guoliang withdrew two transactions of 11,000 ETH from the treasury, and as an independent director, also conducted a share buyback.

ZachXBT stated that CEO Xie Guoliang, advisor Huang Licheng, and COO Lin Yalu subsequently stepped down, allowing Ryan Terribilini to become CEO and Lorne Lantz to continue as CTO. ZachXBT's on-chain analysis chart shows Formosa Financial's financial situation before and after the two transactions of 11,000 ETH on June 22, 2018:

What happened to these two transactions later? ZachXBT mentioned that:

• Xie Guoliang's transaction had 10,500 ETH deposited into Binance on June 29 of that year, and the account's identity could not be verified.
• Huang Licheng's transaction was split into multiple transactions to different Binance accounts at the end of June and the beginning of July, with 2,000 ETH going to czhang.eth.

Big Brother's Funds: Flowing to Cream Engineer

ZachXBT mentioned that the key was to find out who owned these Binance accounts and wallets. The largest outflow of funds, 4,980 ETH from July 26-29 that year, was speculated to be related to the Cream engineer.

The on-chain records showed that the Binance account frequently interacted with FTX and another wallet address, littlebang.eth. Searching for this address on OpenSea revealed the username "Bun919tw," which led to "Bun Hsu" on Google search, who turned out to be the Cream Finance engineer Huang Licheng later. ZachXBT's investigation found that Bun Hsu used a Twitter profile picture gifted by Huang Licheng and had transacted various tokens from previous projects of Big Brother: FMF, SWAG, CREAM, SQUID, PHOON, MCX, MIS/MIC.

ZachXBT raised the question: Why would someone unrelated to Formosa Financial receive 4,980 ETH just three weeks after the ICO?

Big Brother's Funds: Flowing to Advisor Lin Shangru

ZachXBT mentioned that an additional 2,000 ETH was sent to czhang.eth on July 11 of the same year, and this address belonged to Lin Shangru, an advisor who only served until June 22 of that year. Three weeks after receiving the funds, Lin Shangru sent 150 ETH to the former COO Lin Yalu.

ZachXBT questioned why an advisor and COO needed to receive funds to build the project?

Big Brother's Funds: Flowing to Unknown Account harrisonhuang

ZachXBT further investigated another transaction of 1,997 ETH transferred to a Binance account, with the only source of funds being the address harrisonhuang.eth. This address frequently interacted with w9g.eth (Wilson Huang), who is the engineering VP of Secret Silver, founder of XY Finance and GalaXY Kats. w9g.eth would give gifts to harrisonhuang.eth, and harrisonhuang.eth also transferred BAYC to w9g.eth, indicating a connection. Note: According to insiders, this address does not belong to Wilson Huang but to someone else, potentially a misunderstanding by ZachXBT.

ZachXBT also discovered a Twitter account @harrisonhuan9, which replied to the address harrisonhuang.eth in Wilson Huang's event link, suggesting that this Twitter account might be harrisonhuang.eth.

ZachXBT noted that Harrison was not listed in Formosa Financial's white paper or website. He believed this was another case of someone not publicly associated with the project but still receiving project funds.

Wilson Huang's Response: Not True

XY Finance founder Wilson Huang, who was implicated in the incident, denied ZachXBT's unverified information and stated that the anonymous individual was not him.

Secret Silver Violation of Binance Vote Event

ZachXBT then revisited another project, Secret Silver, which had sparked controversy during a "Binance listing" event. Binance had hosted an event where 1 BNB equaled one vote to vote for listings, and although Secret Silver won the vote, it was found to have used multiple fake accounts to vote.

Based on ZachXBT's investigation, the address used by Big Brother during Formosa Financial's ICO had a close connection to Secret Silver, holding up to 8.6 million worth of MITH tokens. He believed that the accounts used to diversify BNB votes were funded by the Secret Silver whale for transaction fees in ETH. This activity was also linked to Bun Hsu and Harrison Huang, with their Binance account addresses receiving funds from Formosa Financial closely following the massive BNB outflows for voting, although it couldn't be proven they were the same individuals. Therefore, the funds from Formosa Financial were likely used for vote manipulation.

ZachXBT even created a comparative chart to compare Formosa Financial's announced fundraising purposes with the actual fund distribution:

ZachXBT also uncovered previously circulated anonymous letters and recordings. An anonymous letter had informed Formosa Financial investors that 22,000 ETH had been stolen. The incoming CEO, Ryan Terribilini, was rumored to have recordings condemning Xie Guoliang and Huang Licheng for their departure. ZachXBT mentioned that he had spoken with many Formosa Financial investors, who were often reluctant to come forward due to the influence of Xie Guoliang and Huang Licheng. Given the involvement of multiple legal jurisdictions, they chose to forget the matter.

Review of Big Brother's Previous Projects

ZachXBT listed the past projects involving Big Brother Huang Licheng:

In February 2018, the decentralized social platform Secret Silver Mithril raised 60,000 ETH, which began unlocking in May 2018 and faced significant selling pressure. By 2020, development was completely abandoned due to minimal code updates.

In early 2018, Formosa Financial served as an advisor, accused of withdrawing funds just three weeks after the ICO.

In October 2018, the intellectual property social market Machi X did not attract much attention.

In July 2020, during the DeFi craze, Cream Finance was launched and was hacked three times, losing over $192 million.

In August 2020, an anonymous team created WIFEY, a Yearn Finance fork highly cooperative with Cream. ZachXBT mentioned that the contract deployer of WIFEY had received multiple transfers from Wilson Huang. The project was abandoned within a few days. Big Brother's addresses Machi, Leo Cheng, and Wilson Huang were early members of Discord.

In October 2020, Swag Finance, the governance token SWAG based on the adult platform Swag.live, became collateral for Cream but was controversial and quickly delisted.

In December 2020, Mith Cash, during the algorithmic stablecoin hype, had a TVL of $1 billion. However, like other algorithmic stablecoins, it couldn't withstand redemptions. Big Brother stated he was only an advisor.

In January 2021, Typhoon Cash, a platform similar to Tornado Cash for mixing coins. Notable investor Andrew Kang was an early investor and publicly supported the protocol. The community pointed out this was a project by Big Brother, raising questions. Pledgers couldn't remain anonymous for rewards, losing the anonymity purpose of coin mixing protocols.

In August 2021, Mud Games, during the NFT Loot craze, led to the anonymous team earning 533.92 ETH, later deemed to have acquired the rarest NFTs for self-benefit.

In October 2021, Squid DAO, similar to DeFi 2.0 Olympus DAO, emerged during the Squid Game series hype. Big Brother was an early holder, ultimately casting the highest governance vote to end the project.

ZachXBT mentioned that Big Brother's focus has shifted to XY Finance and Ape Finance. His entrepreneurial projects typically involve anonymous teams, forking other projects, importing funds from FTX, and having shorter lifecycles, often involving Wilson and Leo. However, Wilson Huang stated that Big Brother Huang Licheng's relationship with XY Finance was limited to being an early product advisor, with no involvement in decisions regarding products or companies.

ZachXBT also noted that some behaviors, such as those of venture capitalist Andrew Kang, choose to turn a blind eye. ZachXBT mentioned that he had questioned Andrew Kang about the scandals and collaborations with Big Brother in October 2021, but Andrew Kang seemed indifferent and continued to support Cream in February of this year.

Big Brother's Response to ZachXBT

In addition to threatening legal action, ZachXBT had previously faced opposition from Big Brother for publicly expressing views on Taiwan's Formosa Financial incident.

ZachXBT mentioned that he had politely informed Big Brother before publishing the article. Big Brother emphasized that he was compensated for serving as an advisor to Formosa Financial and was unaware of the funds being diverted to Bun Hsu and Harrison Huang. Secret Silver did not cheat in the Binance voting event. ZachXBT stated that regardless, such coincidences are unusual.

ZachXBT believed that Big Brother's conclusions were based on the timing of on-chain data and account interactions, which, except for insiders, are challenging to prove. While most of Big Brother's associated projects did not perform well, investors should be cautious; however, they should not ignore Big Brother's keen insight into the crypto market trends and his investment in BAYC. All investors should cultivate the ability to think independently and exercise risk management.