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The B.C. Securities Commission has ruled that the crypto platform ezBtc defrauded its customers, diverting $9.4 million to gambling, personal use.
A panel from Canada‘s British Columbia Securities Commission has found that a crypto trading platform based in British Columbia, dubbed “ezBtc,” engaged in fraudulent activities by misleading its customers and diverting approximately C$13 million (over $9.4 million) of their assets to gambling.
In a press release on Aug. 12, the BCSC said that the platform, established by former British Columbia resident David Smillie, assured customers that their crypto holdings would be stored only in “cold storage.” However, the BCSC panel found that between 2016 and 2019, around one-third of the assets deposited by customers or acquired on ezBtc were instead funneled to “gambling sites or to Smillie’s personal accounts on other crypto trading platforms.”
The BCSC noted that ezBtc’s customers “were unable to recover all of their assets. The deceit led to actual loss.”
Investigation uncovers rapid asset diversion
To uncover the whereabouts of the 2,300 (BTC) and over 600 (ETH) purportedly kept in cold storage by ezBtc, the BCSC enlisted a forensic data analytics firm, though it did not reveal its name. The investigation revealed that over 935 BTC and 159 ETH were “quickly transferred” to either Smillie’s personal accounts or two gambling websites. In one particular case, a customer’s Bitcoin deposit was transferred to a gambling site just 14 minutes after being deposited on ezBtc.
The panel’s findings indicate that Smillie directed the operations of ezBtc and was likely responsible for the unauthorized transfers of customer assets. The panel emphasized that Smillie was not only aware that ezBtc failed to maintain custody of all customer assets, but he should have recognized the severe financial consequences such actions could impose on customers.
The BCSC panel will now deliberate on potential sanctions, which could include monetary penalties and prohibitions from future market participation.