诉讼记录显示，Bitcoin Financial Group的创始人Joseph Donnelly于2008年在新泽西从Raymond和Suzanne Debiasa借款30万美金进行投资，但偿付时却发生违约。此外，Donnelly还协同另一自然人Ahuby Donnelly将借款转为个人用途，同时私自将资金用于为其初创企业Bitcoin Financial Group提供早期投资。
本次诉讼共有四名被告，Bitcoin Financial Group占有一席，Donnelly and Dovetail Capital也位列其中。不过由Ty Sagalow创建的Innovation Insurance Group否认参与了此次欺诈事件。
Sagalow表示，由于认定公司发展受阻，Joseph Donnelly已于去年12月时离职创办了其他商业项目。此外他还提到，Donnelly从未将任何资金投入比特币保险业务，并且认为对于Bitcoin Financial Group的控诉完全是无中生有。
原告新泽西州地方法院的法律经纪人Jason Spiro则重申：被告的确曾经承诺原告，可以从Bitcoin Financial Group业务收入中获益，但这一承诺并未兑现。
"Bitcoin Financial 曾经任命Joe Donnelly作为其总经理和联合创始人，这就意味着其有权代表公司作出业务承诺；Donnelly明确告知投资人其所出借资金将会通过公司创收得到补偿，然而，现则BitCoin Financial却消除了Joe Donnelly与其一切联系，这显然是没有任何法律依据的。" 对于这一说法，Donnelly予以否认。
根据借贷合同，Donnelly需要向其贷款人DeBiases按月付息，本金30万美金，年化利率12%。但自2013年秋季起，Donnelly便停止偿付月息，单方面违约。借贷双方争端从未解决。直至去年春天，Joseph Donnelly通知原告，Dovetail资不抵债发生破产清算，并提出解决方案：可通过Bitcoin Financial Group的收益进行偿付。根据文件表述，Donnelly告知原告其为BitCoin 公司法人代表，只要公司能成功落实项目，所有债务都能获得清偿。
Donnelly的个人资料明显在Bitcoin Financial Group的官网上人为清除，但仍能通过Internet Archive Wayback Machine查询。其中明确表述：已取得人身和健康保险业务许可并完成FINRA 系列6,7,63和65的监管要求。
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 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 New Jersey, reiterated the suit's claim that his clients were promised proceeds from the revenues of Bitcoin Financial Group.
He told CoinDesk:
"BitCoin Financial identified Joe Donnelly as its president and co-founder, Donnelly told investors they would be repaid out of BitCoin Financial deals, but tellingly BitCoin Financial has now removed all traces of Joe Donnelly."
Donnelly declined to comment for this story when reached.
The complaint details Donnelly's alleged investment activities prior to his time with Bitcoin Insurance Group.
According to the agreement outlined in the suit, the Donnellys were required to make monthly interest payments, equal to 12% annually, on top of the $300,000 loaned by the DeBiases.
Those payments, the complaint alleges, stopped arriving in the the fall of 2013, and despite an apparent agreement to pay back the funds in installments, the dispute was never resolved.
It was in the spring of last year, according to the complaint, that Joseph Donnelly told the plaintiffs the Dovetail venture was insolvent and that he was unable to pay them out of those assets. Yet he allegedly offered a solution: he could pay them back through the proceeds of Bitcoin Financial Group.
The filing states:
"As recently as April 2015, Mr Donnelly again asked the DeBiasas for more time to repay their investment, telling them that they would be repaid out of BitCoin Financial’s investment returns."
According to the complaint, Donnelly told the plaintiffs that "I’m a partner in a BitCoin company...if we get a couple dozen of these deals, then it’ll pay off (which I believe is in the cards)", according to the complaint.
In addition to alleged securities fraud, the plaintiffs accused Donnelly of misrepresenting himself as a licensed insurance broker.
It is alleged that Donnelly’s apparent lack of licensure resulted in disciplinary action from a former employer, Lincoln Financial Group. According to LinkedIn, Donnelly worked as an agent for Lincoln between 2001 and 2010.
The filing states:
"Through their investigation into this fraud and based upon conversations with Mr Donnelly’s colleagues, the DeBiasas further learned that Mr Donnelly was not licensed by FINRA to originate [stranger-originated life insurance] policies. In addition, the DeBiasas learned that Lincoln Financial Group had investigated Mr Donnelly for his unlicensed insurance activities and that Lincoln Financial had revoked his permission to produce Lincoln Financial insurance policies."
Donnelly’s profile on the Bitcoin Financial Group website, previously removed but viewable via the Internet Archive Wayback Machine, states that he "holds his Life and Health insurance licenses as well as having completed FINRA Series 6, 7, 63 and 65 designations."
Sagalow told CoinDesk that Donnelly had previously indicated that he possessed a license to broker life insurance.