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Atlanta attorney loses law license after $4 million Bitcoin fraud

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

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

In their review of the situation and written reasoning for revoking McDonald’s law license, the Supreme Court said her “complete disregard for her role as a fiduciary...is staggering and would support disbarment on its own as well.”

According to court records, the issue stemmed from a 2019 incident where McDonald was acting as the fiduciary for a third party on behalf of a client, who before taking the money for herself.

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After a complaint was submitted to the state bar association, officials found she’d started sending money to her own bank accounts as well as family and friends, and paying off various debts, the same day she received the $4 million.

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

Initially, the Bar reminded McDonald of her responsibilities as the fiduciary for the funds. The court record says she assured the Bar that the funds were still “safe” in her Interest on Lawyers’ Trust Accounts (IOLTA).

Days later, after another complaint was sent to the Bar that the funds had not been returned, the Bar “asked directly whether the $4,000,000 was still in her IOLTA account,” but McDonald did not respond.

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Instead, she wired $2 million back to the client, but the court later learned she could not transfer the rest.

“As it turns out, McDonald had begun transferring the third party’s money out of 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 its funds were ‘safe and protected,’ she had already disbursed approximately $2,000,000 of the third party’s funds out of her IOLTA account to herself and others unaffiliated with this transaction.”

Detailing where the funds went, the Georgia Supreme Court records note 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 earlier deals
  • Attempted wire transfer of $1.2 million to a Chinese bank
  • $800,000 to corporation, alleged Bitcoin trader
  • Additional funds used to operate McDonald’s business

A federal court got involved during the process or returning funds and a lawsuit for damages against McDonald. She provided sworn testimony where she admitted to using $440,000 of the money for personal accounts and operating accounts, telling the court they were fees for services to the client and saying she did not need permission to distribute the funds to herself or others.

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

A federal court ordered McDonald to deposit all money in any of her accounts that could be traced back to the initial $4 million from her client into the registry of the court. McDonald only placed $104,200 in the account.

“So, in the end, the third party only recovered $2,414,200 of its $4,000,000 from McDonald, with the remaining $1,585,800 having been retained by McDonald and her family ($335,800) or paid out to various third parties seemingly unrelated to this Bitcoin transaction ($1,250,000),” the court record says.

Additionally, $400,000 was used to repay debts McDonald owed to individuals or entities who had deposited money into her IOLTA account to be held in escrow for earlier deals, but instead had been distributed despite the “deals” never closing, the court wrote. McDonald also told the court she used some of the funds to make donations to charity and to buy goods and services for herself, friends and family, and her business, including as payments on behalf of other clients.

A special master investigating McDonald found that she had violated rules that are intended to block a lawyer from behaving dishonestly, fraudulently, or being deceitful and misrepresenting information and intentionally misleading her client.

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

“After consideration of the entire record in this matter, we dismiss McDonald’s petition for voluntary discipline and order that she be disbarred for her violations of the Georgia Rules of Professional Conduct,” the court ruled, adding that McDonald’s actions, “combined with McDonald’s continuing refusal to see or acknowledge the pivotal role she played in the misdeeds apparently being perpetrated by her client and the fact that she has not made the third party whole, we cannot fathom a punishment less than disbarment.”

The decision to disbar McDonald was unanimous.

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

“The Georgia Supreme Court in its decision merely adopted the findings of the Special Master without conducting a fair and complete independent examination of the facts. The Plaintiff dismissed the case against me because they knew they would not prevail in the litigation. The evidence showed that the party who contracted with the Plaintiff (another named Defendant) had guaranteed the return of up to 2 million dollars of the funds which is the reason the Plaintiff went forward with the transaction. I returned 2 million plus of the funds. Per my Client, I was instructed in writing to disburse funds to facilitate the release of the Bitcoin from their cold storage Bitcoin wallet and for outstanding fees. The Client showed me evidence of their attempts to send a Satoshi and initiate the transaction and that information is contained in the record.

It was obvious that I had been a victim of a scam and obviously trusted people I should not have trusted. Payment to my attorney was done after negotiation between the attorneys and with the agreement of the Plaintiff. The State Bar and Special Master adopted the Plaintiff’s incorrect computations regarding the disbursement of the funds. Plaintiff’s attorney and the State Bar attorney worked in tandem with each other to ensure this result. The Court’s 42 page opinion was written in an attempt to protect the justices and justify the result.”

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