NAIROBI (CoinChapter.com) — The British Columbia Securities Commission (BCSC) has uncovered a major scandal involving Canadian Crypto Exchange ezBtc and its founder, David Smillie.
According to the BCSC, Smillie misappropriated $9.5 million worth of Bitcoin and Ether from customer accounts, funneling the funds into personal gambling ventures and betraying investor trust.
BCSC Uncovers Major Misappropriation of Bitcoin and Ether
Under Smillie’s leadership, Canadian Crypto Exchange ezBtc diverted nearly one-third of the 2,300 Bitcoin and 600 Ether it collected from investors between 2016 and 2019. Smillie transferred 935.46 Bitcoin and 159 Ether to his personal exchange accounts and gambling platforms like CloudBet and FortuneJack.
The BCSC labeled these actions as deceitful, leading to irreversible losses for many ezBtc customers. This misappropriation directly caused customers’ inability to withdraw their assets when ezBtc shut down.
Smillie transferred these assets, betraying investors who believed their funds were safe. The BCSC’s ruling emphasized that this misappropriation directly prevented customers from withdrawing their assets when the platform shut down.
Sanctions Loom Over ezBtc Founder Amidst Crypto Stagnation
Sanctions against Smillie and ezBtc are set to be announced by Sept. 24. These could include monetary penalties and restrictions on future market participation. Despite the ongoing legal proceedings, neither Smillie nor ezBtc representatives appeared in court. However, Smillie did have legal counsel present.
This case highlights the ongoing challenges in the Canadian cryptocurrency market. Adoption of digital currencies remains slow, with only 3% of Canadians using Bitcoin or other cryptocurrencies for daily transactions. Instead, most Canadians continue to prefer traditional payment methods like cash and cards. Incidents like the ezBtc scandal contribute to the broader hesitation toward embracing digital currencies in Canada.
Canada Tightens Regulations on Crypto Firms
Canada has imposed strict regulations on cryptocurrency companies. The Canadian Securities Administrators (CSA) now require 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 Centre (CAFC) reported a rise in crypto scams. In response, the CAFC and the Canadian Investment Regulatory Organization (CIRO) issued a warning to raise awareness about these scams.
