B.C. Crypto Trading Firm Accused of Defrauding Customers of $13M

The B.C. Securities Commission, the independent provincial government agency that oversees investment markets that benefit the public, released details regarding a probe into a B.C.-based crypto trading platform. The B.C. Securities Commission (BCSC) panel alleged that ezBtc, a platform incorporated by then-B.C. resident, David Smillie, was responsible for diverting approximately CA$13 million of customer assets to gambling.

The panel alleged that the crypto trading platform committed fraud by lying to its customers. Moreover, the Securities Commission panel concluded that those alleged fraudulent actions resulted in “actual loss,” while “customers were unable to recover all of their assets.”

The panel’s probe claimed that ezBtc diverted assets deposited by customers between 2016 and 2019. It alleged that approximately one third of all crypto assets deposited by customers or a sum of CA$13 million were diverted to Smillie’s personal accounts on other crypto trading platforms, as well as two gambling websites. The Securities Commission did not disclose the exact sum of the money used for gambling activities, nor confirmed the gambling websites’ names.

During a recent hearing, Smillie did not attend. However, he was represented by a lawyer. The company Smillie incorporated was dissolved in 2022. The next move of the BCSC panel will be to explore options for penalties or sanctions. Such can include monetary fines as well as bans from investment markets.

Forensics Firm Helps Uncover What Happened to One Third of the Customers’ Assets

When ezBtc was operating, the customers were told that the assets they invest will be held in “cold storage.” This is a popular method for keeping cryptocurrency secure that involves storing the assets on offline devices. The technique helps prevent cyberattacks and is generally considered more secure by blocking the access of unauthorized individuals.

ezBtc was responsible for more than 600 ethers and 2,300 bitcoins. The investors of those assets were told that they would be kept in “cold storage.” However, the BCSC used the services of a forensic data analytics expert to help uncover what exactly happened to a portion of the investments.

As explained by the panel: “The analytics firm determined that 935.46 bitcoins and 159 ethers were “quickly transferred” to either Smillie’s personal accounts or two gambling websites.” Moreover, the probe concluded that in one case, a customer deposited Bitcoin on ezBtc and not even 30 minutes later, the same amount was transferred to one online gambling website.

Ultimately, the BCSC panel’s investigation concluded that “Smillie directed the affairs of ezBtc and likely directed the transfers of customer assets.” They also alleged that he was aware that ezBtc diverted customer assets. Still, the panel said that Smillie’s authorization and actions that enabled the platform to engage in such misconduct make him, as well as the platform liable.