VANCOUVER, BC, Aug. 12,
2024 /CNW/ - A B.C. Securities Commission (BCSC)
panel has found that a B.C.-based crypto trading
platform committed fraud by lying to its customers and
diverting about $13 million of their
assets to gambling.
The platform, which operated under the name ezBtc and was
incorporated by then-B.C. resident David
Smillie, allowed customers to buy and sell various
crypto assets. ezBtc and Smillie told customers
that their crypto assets would be held in "cold
storage," a more secure method of keeping digital assets offline to
protect them from cyber threats and unauthorized access.
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.
As the panel notes, "customers were unable to recover all of
their assets. The deceit led to actual loss."
The BCSC hired a forensic data analytics firm to determine what
happened to the 2,300 bitcoins and over 600 ethers that were
supposedly kept in ezBtc's custody in cold storage. The analytics
firm determined that 935.46 bitcoins and 159 ethers were "quickly
transferred" to either Smillie's personal accounts or two
gambling websites. 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.
The panel found that Smillie directed the affairs of ezBtc and
likely directed the transfers of customer assets. 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, the panel said. By authorizing, permitting or
acquiescing in ezBtc's misconduct, Smillie committed the same
misconduct as the platform.
Smillie did not attend the hearing, although he was represented
by a lawyer. The company, which was dissolved in 2022, did not
participate in the proceedings.
The panel will next consider what sanctions to impose, which
could include monetary sanctions and bans from market
participation.
A list of crypto trading platforms authorized to do
business with Canadians is available on the website of
the Canadian Securities Administrators, of which the BCSC is a
member.
About the B.C. Securities Commission
(bcsc.bc.ca)
The B.C. Securities Commission, an independent provincial
government agency, strives to make the investment market benefit
the public. We set rules, monitor compliance by industry, take
action against misconduct, and provide guidance to investors and
industry. As guardians of B.C.'s investment market, we're committed
to maintaining a market that is honest, fair, competitive and
dynamic, enabling British Columbians to thrive.
Learn how to protect yourself and become a more informed
investor at www.investright.org
SOURCE British Columbia Securities Commission