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Ruholamin Haqshanas
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Ruholamin Haqshanas
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The Canadian cryptocurrency trading platform ezBtc and its founder, David Smillie, are accused of gambling away approximately 13 million Canadian dollars ($9.5 million) of user funds.
A panel from the British Columbia Securities Commission (BCSC), a provincial regulator, has found that ezBtc diverted customer investments for personal use, including gambling.
Operating between 2016 and 2019, ezBtc attracted significant investments, amassing over 2,300 Bitcoin and more than 600 Ether from its users.
ezBtc Went Offline After Stealing User Funds
The platform claimed that all user funds were securely stored in cold storage.
However, in September 2019, ezBtc went offline permanently, and by 2022, it had been officially dissolved.
The BCSC panel’s investigation revealed that Smillie had siphoned off nearly one-third of user funds for gambling and personal expenses.
Specifically, 935.46 Bitcoin and 159 Ether were transferred from ezBtc to Smillie’s exchange accounts or directly to online gambling platforms such as CloudBet and FortuneJack.
The panel highlighted that these transfers were sometimes made directly from ezBtc accounts and, in other cases, were routed through Smillie’s personal exchange accounts.
“The transfers to the two gambling websites were sometimes direct from ezBtc, and sometimes indirect from ezBtc to Smillie’s exchange accounts and then to the gambling websites,” they wrote.
The panel further noted that the “deceit” orchestrated by Smillie and ezBtc “led to actual loss” as customers could not withdraw their assets.
Sanctions against Smillie and ezBtc are expected to be announced by September 24.
These could include financial penalties or bans on future market participation.
Although Smillie did not attend the hearing in person, he was represented by legal counsel.
The scandal comes amid a stagnant period for cryptocurrency adoption in Canada, where only 3% of the population uses digital currencies like Bitcoin for everyday transactions.
Despite the growing global interest in cryptocurrencies, many Canadians continue to prefer traditional payment methods, such as cash, cards, and e-transfers, largely due to a reluctance to abandon cash-based transactions.
Canada Takes Harsh Stance Against Crypto Companies
Last year, Canadian Securities Administrators introduced new rules mandating crypto firms to make commitments to protect investors through “an enhanced pre-registration undertaking.”
Under the CSA’s “pre registration undertakings,” firms have to agree to segregation in crypto custody, and they must have a chief compliance officer on staff.
They must also eliminate leveraged trading and not allow users to trade or hold stablecoins.
However, not all exchanges have exited the country, with some committed to succeeding in a regulated Canadian market.
As reported, Coinbase has appointed a former executive from Shopify as its new country director in Canada as part of its strategy to adjust to the evolving regulatory landscape in the country.
Meanwhile, earlier this year, the Canadian Anti-Fraud Centre (CAFC) warned about a surge in crypto scams targeting Canadian citizens.
In response to this concerning trend, the CAFC, in collaboration with the Canadian Investment Regulatory Organization (CIRO), has issued a warning to raise awareness about these sophisticated scams, particularly those involving prolonged online communication.
