BCSC Uncovers Major Misappropriation of Bitcoin and Ether by Canadian Crypto Exchange ezBtc Founder

The British Columbia Securities Commission (BCSC) has uncovered a major scandal involving Canadian Crypto Exchange ezBtc and its founder, David Smillie.

A major scandal has been uncovered by the British Columbia Securities Commission (BCSC) involving Canadian cryptocurrency exchange ezBtc and its founder, David Smillie.

According to the BCSC, Smillie misappropriated nearly $9.5 million in Bitcoin and Ether from customer accounts, which he then funneled into his personal gambling ventures. This ultimately led to a betrayal of investor trust and legal sanctions.

Canadian virtual currency exchange ezBtx scandal has been discovered. Founder gambles customer funds

Canadian virtual currency exchange ezBtx scandal has been discovered. Founder gambles customer funds

BCSC charges the founder of Canadian virtual currency exchange ezBtx with embezzlement of funds.

BCSC Uncovers Major Misappropriation of Bitcoin and Ether by Canadian Crypto Exchange Founder

Smillie Diverted One-Third of ezBtc’s Bitcoin, Ether into Personal Accounts, Gambling Platforms

Under Smillie's leadership, Canadian cryptocurrency exchange ezBtc diverted nearly one-third of the 2,300 Bitcoin and 600 Ether it collected from investors between 2016 and 2019. Specifically, Smillie transferred 935.46 Bitcoin and 159 Ether to his personal exchange accounts and gambling platforms, including CloudBet and FortuneJack.

The BCSC labeled these actions as deceitful, leading to irreversible losses for many ezBtx customers. This misappropriation directly caused customers’ inability to withdraw their assets when ezBtx shut down.

According to the BCSC’s ruling, Smillie transferred these assets, betraying investors who believed their funds were safe. The BCSC’s statement highlighted that this misappropriation directly prevented customers from withdrawing their assets when the platform shut down.

Sanctions against Smillie, ezBtx to be Announced by Sept. 24

Sanctions against Smillie and ezBtc are set to be announced by the BCSC on September 24. These sanctions could include monetary penalties and restrictions on future market participation.

Despite the ongoing legal proceedings, neither Smillie nor representatives of ezBtc appeared in court. However, Smillie did have legal counsel present at the hearing.

This case serves as a legacy to the challenges that continue to plague the Canadian cryptocurrency market. Despite efforts to boost adoption, only 3% of Canadians use Bitcoin or other cryptocurrencies for daily transactions, with most preferring traditional payment methods like cash and cards. Incidents like the ezBtx scandal contribute to the broader hesitation toward embracing digital currencies in Canada.

Canada has imposed strict regulations on cryptocurrency companies, with the Canadian Securities Administrators (CSA) now requiring crypto firms to commit to stronger investor protections through an “enhanced pre-registration undertaking.”

These rules mandate asset segregation in crypto custody, the appointment of a chief compliance officer, and the elimination of leveraged trading and stablecoin transactions.

Despite the regulations, some exchanges, like Coinbase, continue to operate in Canada, adapting to the new regulatory landscape.

Earlier this year, the Canadian Anti-Fraud Center (CAFC) reported a rise in crypto scams, prompting the CAFC and the Canadian Investment Regulatory Organization (CIRO) to issue a warning to raise awareness about these scams.

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