Attorney Ordered to Pay $5.2M for Releasing Bitcoin Funds From Escrow

A federal judge has ruled that a New York attorney is responsible for repaying a crypto investment firm after he prematurely released escrow funds set aside for buying $5 million in Bitcoin.

According to an Aug. 13 report on Law360, U.S. District Judge Alison J. Nathan confirmed that attorney Aaron Etra is on the hook for $4.6 million to the San Francisco-based investment firm Benthos Master Fund.

The total judgment was for $5.255 million, plus accruing interest.

The agreement in question dates to 2018, when Benthos reached out to Etra to act as an escrow agent for the firm's Bitcoin purchases.

The two signed an agreement - appropriately called the Bitcoin Agreement - with Valkyrie Group, an outfit tasked with finding third parties interested in selling their crypto holdings.

Initially, Benthos intended to purchase $5 million in BTC - roughly 10,000 coins at the time - and deposited that amount into the escrow fund.

Without seeing the approval of Benthos, Etra transferred $4.6 million of the total Bitcoin fund out of escrow over two transactions in August 2018, which never resulted in any crypto assets being sent to the firm.

After multiple motions from Benthos essentially asking Etra to stop moving money out of the fund and account for what happened to the $4.6 million, a court ruled the attorney had to produce all documents and information related to the missing funds.

Etra did return the remaining $400,000 and produce records of his communications with Bitcoin sellers, so previous motions by Benthos to sanction the attorney and find him in contempt of court were denied.

The judgement is for a total of $5.2 million plus interest.