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The Hong Kong-based crypto company GSR Markets has reportedly sued the legal firm McDonald and McDonald Law together with a supposed Bitcoin seller and also the banking giant Wells Fargo over a poorly managed escrow account and a Bitcoin transaction going wrong, very wrong.
The plaintiff (GSR Markets) claims that it wired $4 million on January 3rd to an escrow account supposedly managed by the law firm. The amount was paid into the escrow account in exchange for the equivalent amount of Bitcoin – 1,000 Bitcoins at the market price of $3,635 per Bitcoin. However, the plaintiff claims that it did not receive any Bitcoin and when it asked for a refund only received half of the money paid into the escrow account, $2 million.
GSR Markets explains that it acted as a broker for another firm called Alivia Corporation Pty, Ltd. and expected to get the Bitcoin delivered way before now. Instead, it got no Bitcoin, lost about $380,000 in a bid to unwind its short position, and got only half of the initial amount wired into the account.
The crypto company is suing the lawyer for failure to act in good faith, as is expected from every lawyer holding a trust account for his client; the seller for failure to deliver the Bitcoin as promised; and Wells Fargo bank, where the IOLTA (Interest on Lawyer Trust Account) account was held, for allegedly aiding and abetting a fraud.
The lawyer for GSR Markets has filed a complaint with the Georgia bar – as all three defendants are based in the United States – and the court has issued a temporary restraining order to freeze any funds held by the lawyer – whether IOLTA or not.
Like every legal story, there is a second side to this tale, and it is a bit confusing and implausible; but that is for the court to decide. The lawyer with McDonald and McDonald Law has filed a response denying all charges laid by the plaintiff. She claims that she is a victim of the scam too, if there was actually a scam. She denied holding a fiduciary duty to the buyer (the plaintiff) and that her duty is exclusive to the seller. She added that the seller informed her firm of a hacking issue that caused the delay and reported that a portion of the requested Bitcoin has been wired to unlock a Bitcoin wallet. In addition, she claimed that the plaintiff confirmed the delivery of 2,000 non-spendable Bitcoin, which she now thinks is not a real thing.
The story is a bit confusing as both parties hold different views of what happened. We will have to wait to uncover more details to know the exact story.