Canadian regulator finds crypto platform ezBtc diverted over $9m in assets

The BC Securities Commission has ruled that cryptocurrency platform ezBtc defrauded its customers, diverting $9.4 million for gambling and personal use.

A panel of Canada’s British Columbia Securities Commission has found that a cryptocurrency trading platform called “ezBtc” based in British Columbia engaged in fraudulent activity by misleading its customers and diverting approximately $13 million CAD (more than $9.4 million) of their assets to gambling.

The platform, founded by former British Columbia resident David Smillie, assured customers that their crypto assets would only be kept in “cold storage,” the BCSC said in a press release on Aug. 12. But the BCSC panel found that nearly a third of the assets deposited by customers or acquired on ezBtc between 2016 and 2019 were instead transferred to “gambling sites or Smillie’s personal accounts on other crypto trading platforms.”

The BCSC noted that ezBtc customers “were unable to recover all their assets,” noting that the scam led to actual losses.

Investigation uncovers rapid asset diversion

To uncover the location of the 2,300 (BTC) and over 600 (ETH) that ezBtc allegedly kept in cold storage, the BCSC engaged a forensic data analytics firm, although it did not disclose its name. The investigation revealed that over 935 BTC and 159 ETH were “rapidly transferred” to Smillie’s personal accounts or two gambling sites. In one particular case, a customer’s Bitcoin deposit was transferred to a gambling site just 14 minutes after it was deposited into ezBtc.

The panel’s findings suggest that Smillie directed ezBtc’s operations and was likely responsible for unauthorized transfers of customer assets. The panel emphasized that Smillie was not only aware that ezBtc was not ensuring custody of all customer assets, but also should have realized the serious financial consequences such actions could impose on customers.

The BCSC panel will now discuss possible sanctions, such as fines and a ban on future market participation.