Atlanta Attorney Disbarred for Role in $4 Million Bitcoin Fraud Scheme

News | June 18, 2024 By:

On Thursday, June 13, 2024, The Atlanta Journal-Constitution reported that Atlanta attorney Diana McDonald was disbarred by the Georgia Supreme Court for her role in a $4 million Bitcoin fraud scheme.

According to the court documents, in January 2019 McDonald agreed to hold $4 million in escrow in her law firm trust account as payment for 1,000 Bitcoins that her client promised to deliver to cryptocurrency trading firm GSR Markets. However, the client failed to provide the Bitcoins and McDonald began spending the funds almost immediately. She transferred over $400,000 to her own accounts and loaned or gifted hundreds of thousands more to friends and family. McDonald also attempted to wire $1.2 million to a Chinese bank.

In total, McDonald admitted to converting more than $1.5 million of GSR’s funds for personal and business expenses, despite assuring both GSR and the State Bar of Georgia that the Bitcoin transfer was pending. When GSR filed a lawsuit attempting to recover their money in March 2019, McDonald claimed she was entitled to $440,000 in legal fees, although the State Bar found this claim to be baseless.

The 42-page opinion from the Georgia Supreme Court outlined McDonald’s “complete disregard” for her responsibilities as a fiduciary, noting that her actions were “staggering.” McDonald had requested retirement in lieu of disbarment but this was denied. Although not criminally prosecuted, McDonald will no longer be allowed to practice law in Georgia.

GSR was eventually able to recover $414,200 that McDonald still had through a court order but incurred significant financial damages. Her client, Hugh Austin, was prosecuted in New York for multiple cryptocurrency fraud schemes that bilked over 20 victims of more than $10 million total. GSR continues legal action against Wells Fargo bank, where McDonald held her trust account, for allegedly failing to act on red flags of fraudulent activity.

The disbarment of Diana McDonald serves as a warning for attorneys to properly handle client funds and underscores the need for oversight of cryptocurrency transactions increasingly used in investment schemes. It remains to be seen if GSR can further recover losses from civil cases still ongoing over two years after the initial $4 million fraud.

 

 

Source: The Atlanta Journal-Constitution