The B.C. Securities Commission has ruled that the crypto platform ezBtc defrauded its customers, diverting $9.4 million to gambling and personal use.
BCSC Ruling on ezBtc Fraud
A panel from Canadaβs British Columbia Securities Commission has found that a crypto trading platform based in British Columbia, known as βezBtc,β engaged in fraudulent activities by misleading its customers and diverting approximately C$13 million (over $9.4 million) of their assets to gambling.
The BCSC announced that the platform, established by former British Columbia resident David Smillie, assured customers that their crypto holdings would be stored only in βcold storage.β 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 βgambling sites or to Smillieβs personal accounts on other crypto trading platforms.β
The BCSC noted that ezBtcβs customers βwere unable to recover all of their assets. The deceit led to actual loss.β
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. The investigation revealed that over 935 BTC and 159 ETH were βquickly transferredβ to either Smillieβs personal accounts or two gambling websites. In one particular case, a customerβs Bitcoin deposit was transferred to a gambling site just 14 minutes after being deposited on ezBtc.
The panelβs 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.
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