This Canadian crypto exchange staked $9.5 million of users’ Bitcoin and Ether

The British Columbia Securities Commission (BCSC) has determined that cryptocurrency trading platform ezBtc and its founder, David Smillie, defrauded investors of approximately $9.5 million, equivalent to C$13 million, in crypto assets.

The BCSC’s investigation found that ezBtc and Smillie engaged in deceptive and misleading practices, misappropriating funds intended for customer accounts.

Crypto funds diverted for gambling

According to the official press release shared by the Canadian regulatory agency, ezBtc started accepting deposits from customers in December 2016 and ceased operations permanently around September 2019. During this period, customers deposited more than 2,300 BTC and over 600 ETH in their ezBtc accounts.

Despite claims that all crypto investments were secured in cold storage, ezBtc quickly transferred incoming assets elsewhere. The BCSC panel found that Smillie diverted almost a third of users’ funds for gambling and personal use. The panel concluded that the “deception” orchestrated by the founder and the company led to significant losses for customers, who were unable to withdraw their assets.

“Respondents perpetrated securities fraud by lying to customers about keeping their crypto assets in cold storage in the custody of ezBtc, but instead diverted 935.46 customer bitcoins and 159 customer ether to the its own purpose.”

The court has ordered the chief executive officer and the respondents to make submissions on the penalties. The executive director must deliver submissions by September 3, 2024, and Smillie must respond by September 17, 2024.

Canada has seen its fair share of illicit crypto-related activity. For example, Aiden Pleterski, Ontario’s “Crypto King,” was arrested in May of this year on fraud and money laundering charges related to an alleged Ponzi scheme. The 25-year-old and his co-conspirator, Colin Murphy, 27, allegedly defrauded unsuspecting victims out of around $30 million.

However, institutional demand in the country for crypto assets remains unchanged.

Increase in institutional demand in Canada

A recent KPMG survey revealed a significant increase in crypto exposure among Canadian institutional investors in 2023 compared to 2021. The study, which included 65 respondents from institutional investors and financial services organizations, found that 39% of institutional investors had direct or indirect exposure to crypto assets. , up from 31% in 2021.

It also found that half of financial services firms now offer crypto services, up from 41% two years ago. Notably, a third of institutional investors allocated 10% or more of their portfolios to crypto assets, reflecting a growing interest in alternative investments as a hedge against inflation and economic uncertainty.

SPECIAL OFFER (Sponsored) Binance Free $600 (Exclusive to CryptoPotato): Use this link to register a new account and receive an exclusive welcome offer of $600 to Binance (full details).

2024 LIMITED OFFER on BYDFi Exchange – Up to $2888 Welcome Reward, Use this link to register and open a 100 USDT-M position for free!