More than a year ago, an effort began to offer insurance products to companies in the bitcoin space – an intriguing idea at the time given the infancy of the industry and the inability of startups to secure this protection for user funds.
The initiative marked some key early successes – security startup BitGo and wallet service Xapo would go on to acquire insurance by way of those efforts – but at least one of those involved says demand for insurance, particularly bitcoin theft insurance, never fully materialized.
Now, a former president and founder of a business venture dedicated to promoting these insurance products to bitcoin companies is facing serious fraud allegations.
Court documents obtained by CoinDesk allege that Joseph Donnelly, founder and ex-president of Bitcoin Financial Group borrowed $300,000 from Raymond and Suzanne DeBiasa of New Jersey in 2008 to invest the money, but failed to repay the funds.
Instead, it is alleged, Donnelly, along with another individual named Ahuby Donnelly, diverted to funds for personal use – and as a means of funding for Bitcoin Financial Group in the venture’s infancy. Allegations raised
Bitcoin Financial Group is named as one of the four defendants in the suit, along with the Donnellys and Dovetail Capital. The firm, led by Innovation Insurance Group founder Ty Sagalow, has denied any involvement with the alleged fraud.
Sagalow told CoinDesk that Joseph Donnelly left in December of last year to pursue other business activities after the venture failed to gain significant traction in the industry.
Further, he said that Donnelly never invested any of his own money into the bitcoin insurance venture, and has called the contention that Bitcoin Financial Group is somehow connected to the alleged crimes "unfounded".When reached, attorney Jason Spiro, who is representing the plaintiffs in the US District Court for the District of […]
