Securities Commission Panel Finds ezBtc, Owner Committed Fraud Against Unwitting Customers

ezBtc promised asset security

Despite being dissolved in 2022, the crypto-trading platform ezBtc is now in the news for allegedly defrauding its customers. The British Columbia-based company is said to have siphoned away around $13m of its assets to owner David Smillie and the platform’s gambling operations.

guaranteed to customers that their crypto assets would be safe in “cold storage”

A securities commission panel found that ezBtc, incorporated by Smillie, empowered customers to buy and sell a diverse offering of crypto assets. ezBtc and Smillie guaranteed to customers that their crypto assets would be safe in “cold storage,” even going so far as to insist that said technology offered a more secure method of digital asset storage by keeping assets offline and protecting them from cyber threats and unauthorized access.

Missing crypto investigated

An August 12 statement from the securities commission said: “Instead, the BCSC panel found that approximately a third of all the crypto assets that customers deposited with ezBtc or acquired on the ezBtc platform between 2016 and 2019 were diverted to gambling sites or to Smillie’s personal accounts on other crypto trading platforms.”

The panel added: “Customers were unable to recover all of their assets. The deceit led to actual loss.”

The findings stem from a forensic data analytics firm taking a contract to unearth what happened to 2,300 bitcoin and over 600 ether that were supposed to be held in cold storage by ezBtc. Instead of finding that the assets were held securely, the firm found that 935.46 bitcoin and 159 ether were “quickly transferred” to either Smillie’s personal accounts or two gambling websites.

Nothing was unintentional

The securities commission panel said: “In one instance, a customer deposited a certain amount of bitcoin on ezBtc and just 14 minutes later, ezBtc transferred that exact same amount of bitcoin to one of the gambling sites.” Any chance of Smillie evading responsibility dissolved once the panel found him not only responsible for the actions of ezBtc, but that he had “likely directed” the transfers to himself and gambling websites.

diverting customer assets could result in serious financial consequences”

The panel said: “Not only was Smillie aware that ezBtc did not keep custody of all of its customers’ assets, but he should have been aware that diverting customer assets could result in serious financial consequences for those customers. By authorizing, permitting or acquiescing in ezBtc’s misconduct, Smillie committed the same misconduct as the platform.”

The panel will soon determine possible sanctions, which could be as serious as financial penalties and a ban on further participation in the market.

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