The Canadian cryptocurrency trading platform ezBtc and its founder, David Smillie, are under scrutiny after being accused of defrauding customers out of $9.5 million. 

According to the British Columbia Securities Commission (BCSC), Smillie allegedly misappropriated these funds, using a significant portion for gambling instead of securing them as promised. 

The platform had assured its users that their investments would be held in "cold storage," a security measure intended to keep digital assets offline and safe from cyberattacks. However, the reality was starkly different.

More Findings

Between 2016 and 2019, approximately one-third of all crypto assets deposited with ezBtc, including over 600 ethers and 2,300 bitcoins, were allegedly diverted to Smillie's personal accounts or gambling websites. 

The BCSC's investigation was conducted with the assistance of a forensic data analytics expert, who played a crucial role in tracing the diverted funds.

In one case, a customer's Bitcoin deposit was moved to a gambling site within 30 minutes, highlighting the rapid and deliberate nature of the misappropriation. 

According to the expert's analysis, a significant portion of the customers' assets were misappropriated. The investigation concluded that Smillie, as the founder and operator of ezBtc, likely directed these transfers and was fully aware of the fraudulent activities.

The BCSC panel's findings allege that Smillie and ezBtc committed fraud by lying to customers about the security of their investments. As a result of the fraudulent acts, many customers were unable to recover their assets, according to the panel. 

The exact amount of money used for gambling has not been disclosed, nor have the names of the gambling websites involved.

Legal Ramifications and Potential Penalties

The seriousness of the allegations suggests that Smillie could face severe consequences if found guilty of the charges.

Smillie did not attend a recent hearing but was represented by a lawyer. The company he incorporated, ezBtc, was dissolved in 2022, adding another layer of complexity to the case. The dissolution of the company may hinder efforts to recover the misappropriated funds, leaving many investors in a precarious position.

For the affected customers, the road to recovery may be long and uncertain.