Canadian crypto exchange founder accused of defrauding clients of over 9 million USD
Canadian crypto exchange founder accused of defrauding clients of over 9 million USD
The founder of Canadian crypto exchange ezBtc is under scrutiny after regulators discovered that he allegedly diverted over $9 million in user assets for personal use, including funding gambling activities.
In a recent development, Canadian regulators have unveiled a case involving the cryptocurrency platform ezBtc. According to the coverage by crypto.news, the platform’s founder, David Smillie, is accused of misappropriating approximately C$13 million (over $9.4 million) of client assets. The allegations state that these funds were redirected for personal use, including significant gambling expenses, leading to a major breach of trust among users of the platform.
The news release by the British Columbia Securities Commission (BCSC) says that the platform misled users by promising that their cryptocurrency would be securely stored in "cold storage." However, a significant portion of these funds was redirected to gambling websites and Smillie's personal accounts, leaving many clients unable to recover their assets.
Between 2016 and 2019, ezBtc managed to attract a substantial amount of client deposits, including around 2,300 Bitcoin (BTC) and over 600 Ethereum (ETH). Despite assurances that these assets would be kept safe, the investigation revealed that approximately one-third of the deposited funds were swiftly transferred to gambling platforms or Smillie’s accounts on other crypto exchanges. In one striking instance, a client's Bitcoin deposit was redirected to a gambling site just 14 minutes after being received by ezBtc.
The investigation into ezBtc's activities was conducted by a forensic data analytics firm, which traced the flow of assets and uncovered the rapid diversion of funds. In the latest case, over 935 Bitcoin and 159 Ethereum were transferred away from the platform, far from the promised "cold storage."
As a result of these findings, the BCSC panel is now considering appropriate sanctions against Smillie, which could include significant monetary penalties and prohibitions on participating in future market activities.
The case underscores the importance of regulatory oversight in the cryptocurrency sector and the need for customers to exercise caution when entrusting their assets to trading platforms.
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