Atlanta Attorney Loses Law License After $4M Bitcoin Fraud – WSB-TV Channel 2

ATLANTA — The Georgia Supreme Court has chosen to disbar an Atlanta-based attorney as punishment for using a client’s funds for personal gain.

Although former attorney Diana McDonald was not prosecuted for fraud, the court’s investigation into her actions surrounding a $4 million Bitcoin transaction resulted in her losing her ability to practice law in the state.

In its review of the situation and written reasons for the revocation of McDonald’s legal license, the Supreme Court said its “complete disregard for its fiduciary role…is staggering and would also support disbarment.”

According to court records, the issue stems from a 2019 incident in which McDonald acted as a fiduciary for a third party on behalf of a client, who before then took the money for herself.

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After a complaint was filed with the state bar, authorities discovered that she had begun sending money to her own bank accounts as well as those of family and friends, and to repay various debts, the same day she received the $4 million.

Due to non-payment, the third party asked McDonald for their money back, but did not receive it. After repeated attempts to recover the $4 million, they filed a complaint with the Georgia Bar Association.

Initially, the Law Society reminded McDonald of his responsibilities as trustee of the funds. The court filing says she assured the bar that the funds were still “safe” in her attorney trust account (IOLTA) interests.

A few days later, after another complaint was sent to the Bar that the funds had not been returned, the Bar “directly asked if the $4,000,000 was still in his IOLTA account”, but McDonald did not didn’t respond.

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Instead, she returned $2 million to the client, but the court later heard she could not transfer the rest.

“It appears that McDonald had begun transferring the third-party money from her IOLTA account to different recipients on the same day she received it,” the court wrote. “By January 7, when she assured the third party that her funds were ‘safe and secure,’ she had already disbursed approximately $2,000,000 of third party funds into her IOLTA account for herself and others not affiliated with this transaction.

Detailing where the funds went, Georgia Supreme Court records list the following recipients:

• $415,000 sent to McDonald’s accounts
• $25,000 to McDonald’s sister
• $450,000 to parties involved in the client’s previous transactions
• Attempted wire transfer of $1.2 million to Chinese bank
• $800,000 to company, alleged Bitcoin trader
• Additional funds used to operate the McDonald’s business

A federal court intervened during the process of returning the funds and pursuing damages against McDonald. She provided sworn testimony in which she admitted to using $440,000 of the money for personal and operating accounts, telling the court they were fees for services rendered to the client and saying she did not need authorization to distribute the funds to herself or others.

However, the court determined that McDonald still had $310,000 in the IOLTA accounts and ordered him to transfer it back to the customer. Instead, the Georgia Supreme Court says McDonald continued to use the money for herself.

A federal court ordered McDonald to deposit with the court clerk all money in any of his accounts that could be traced back to his client’s original $4 million. McDonald only placed $104,200 in the account.

“Thus, in the end, the third party only recovered $2,414,200 of its $4,000,000 from McDonald, with the remaining $1,585,800 being kept by McDonald and his family ($335,800) or paid to various third parties apparently unrelated to this Bitcoin transaction ($1,250,000),” the court filing states.

Additionally, $400,000 was used to repay McDonald’s debts to individuals or entities who had deposited money into its IOLTA account to hold in escrow for prior transactions, but which had been distributed despite the fact that the “transactions” were never concluded, the court wrote. McDonald also told the court she used some of the funds to make donations to charity and to purchase goods and services for herself, friends, family and her business, including as payments on behalf of other clients.

A special expert investigating McDonald found that she violated rules intended to prevent a lawyer from behaving dishonestly, fraudulently or deceptively, misrepresenting information and intentionally misleading a client.

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At the end of the process, McDonald asked the court to have her voluntarily retire rather than be disbarred, but the judges denied her request.

“After reviewing the entire record in this case, we deny McDonald’s request for voluntary discipline and order him disbarred for his violations of the Georgia Rules of Professional Conduct,” the court ruled, adding that McDonald’s actions McDonald’s, “combined with McDonald’s continued refusal to see or acknowledge the central role she played in the misdeeds apparently perpetrated by her customer and the failure to cure the third party, we cannot imagine a punishment less than disbarment.

The decision to delist McDonald was unanimous.

In response to a request for comment from Channel 2 Action News, McDonald stated in part:

“The Supreme Court of Georgia, in its decision, simply adopted the findings of the Special Master without conducting a fair and complete independent review of the facts. The plaintiff dismissed the complaint against me because he knew he would not win the litigation. The evidence showed that the party who contracted with the plaintiff (another named defendant) had guaranteed the return of funds up to $2 million, which is why the plaintiff continued with the transaction. I have returned more than 2 million funds. According to my client, I was instructed in writing to disburse funds to facilitate the release of Bitcoin from his cold storage Bitcoin wallet and for unpaid fees. The customer showed me proof of their attempts to send a Satoshi and initiate the transaction and this information is contained on file.

It was obvious that I had been scammed and was obviously trusting people I shouldn’t have trusted. The payment to my lawyer was made after negotiation between the lawyers and with the agreement of the plaintiff. The State Bar and Special Master adopted Plaintiff’s incorrect calculations regarding the disbursement of funds. Plaintiff’s counsel and State Bar counsel worked in tandem to secure this outcome. The Court’s 42-page opinion was written in an effort to protect the justices and justify the outcome.

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