Canadian Crypto Platform ezBtc Accused of Misappropriating $9.5 Million in Customer Funds for Gambling – The UCW Newswire

Canadian cryptocurrency trading platform ezBtc and its founder, David Smillie, have been accused of defrauding customers by misappropriating approximately 13 million Canadian dollars ($9.5 million) of their cryptocurrency investments. The British Columbia Securities Commission (BCSC), a provincial regulator in Canada, uncovered that Smillie diverted a significant portion of user funds for personal gambling activities.

The BCSC panel, tasked with investigating ezBtc’s operations, determined that the platform misappropriated customer assets “for their own purposes.” Between 2016 and 2019, ezBtc collected over 2,300 Bitcoin and more than 600 Ether from unsuspecting investors, under the pretense that their cryptocurrency was securely stored in cold storage. However, nearly one-third of these funds were channeled into Smillie’s gambling habits and personal accounts.

The panel’s findings paint a damning picture of deceit and mismanagement. “We find that in aggregate, 935.46 Bitcoin and 159 Ether were transferred by ezBtc to Smillie’s exchange accounts and/or to CloudBet and FortuneJack,” the panel reported. “The transfers to the two gambling websites were sometimes direct from ezBtc and sometimes indirect, moving first to Smillie’s exchange accounts before ending up at the gambling sites.”

The platform, which went offline permanently around September 2019 and was officially dissolved in 2022, left many customers in financial ruin. Users were unable to withdraw their assets, leading to significant financial losses.

The BCSC has indicated that sanctions against Smillie and ezBtc are expected to be imposed by September 24. These could include monetary penalties and bans on future market participation. While Smillie did not personally attend the hearing, he was represented by legal counsel.

This case has added to the growing scrutiny of cryptocurrency platforms in Canada, where crypto adoption has remained relatively stagnant. Despite the promises of digital currencies, only about 3% of the Canadian population uses Bitcoin or other cryptocurrencies for everyday transactions. Canadians continue to favor traditional payment methods, such as cash, cards, and e-transfers, over the complexities and risks associated with cryptocurrencies.

The slow adoption of crypto in Canada is attributed to a general reluctance to embrace a cashless economy. However, cryptocurrency offers several advantages, particularly for cross-border payments, that could potentially sway Canadian consumers in the future. Cryptocurrencies enable near-instantaneous transfers, lower transaction fees, and provide financial inclusion for those without traditional banking services.

As the Canadian regulatory environment tightens, the ezBtc scandal does not represent the overall cryptocurrency landscape, in any industry bad actors do exist. It does underscore the need for defined oversight and transparency in the burgeoning cryptocurrency market, as well as the importance of secure and trustworthy platforms.

Decentralized crypto trading can be void of an incident such as with ezBtc as self-custody is involved, the platforms provide the technology in order for peer to peer transactions to take place. While centralized crypto trading platforms offer off ramping options, the risk for bad actor activity does exist, so it is always a good idea to deal with reputable centralized crypto exchanges such as Coinbase.

Ben Tang
Digital Assets Desk