A New York attorney has been ordered to pay over $5 million to a crypto investment firm for dereliction of duty as an escrow agent.
The agent, Aaron Etra, will have to pay more than $5.25 million plus 4% interest ($59,887) for violating his contractual duties to San Francisco investment firm Benthos Master Fund, according to a document filed at the U.S. district court in the Southern District of New York on Wednesday.
Etra had been employed by Benthos to act as an escrow agent in 2018 and was entrusted with holding $5 million meant for the purchase of bitcoin.
The firm had arranged the bitcoin purchase agreement with a firm called Valkyrie Group, which had planned to buy 10,000 bitcoin from a Russian oligarch, according to Law360.
When Benthos saw that Etra was moving money out of escrow without authorization, the firm formally requested Etra cease all activity relating to the release of its funds.
Benthos argued to the court that the attorney released $4.6 million of its funds in violation of Etra’s “contractual and fiduciary duties.”
As a result, Benthos claims it received none of its expected bitcoin.
On June 28, 2019, Benthos began arbitration proceedings based on a clause in the escrow agreement.
Despite receiving formal notice of the bid to resolve the issue, and having communicated with the arbitrator via email, the attorney failed to appear at the March 17, 2020, arbitration hearing.
The arbitrator then awarded Benthos $5,254,561 on April 9, 2020, which included damages and the cost of arbitration, plus the pre-award interest.
He had previously been ordered to repay the firm’s remaining $400,000.
When Etra attempted to appeal the decision as “one-sided” on Wednesday, U.S. District Judge Alison J. Nathan said Etra “only has himself to blame” for having failed to appear or provide evidence.
Etra “was clearly required to arbitrate any disputes under the escrow agreement” and having failed to do so is now liable, the judge said in a court document filed on Thursday.