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.
Bitcoin Financial Group is named as one