Canadian Crypto Exchange Wagers $9.5 Million in Bitcoin and Ethereum, Sparking a Regulatory Upheaval

A controversy surrounds a Canadian crypto exchange after it misappropriated $9.5 million in Bitcoin and Ether for gambling, sparking concerns with regulatory authorities and distressing the investors.

Canadian Regulator Accuses ezBtc of Misappropriating Funds

The Canadian cryptocurrency exchange, ezBtc, alongside its founder, David Smillie, have been implicated in the defrauding of their clients’ funds amounting to over $13.5 million (approximately $13.1 million USD) in bitcoin assets, which were subsequently spent on gambling.

The British Columbia Securities Commission (BCSC), a provincial regulatory body in Canada, conducted a session which concluded that ezBtc had misappropriated client funds “for their own uses.”

Before its permanent cease of operations in September 2019 and its ultimate dissolution in 2022, ezBtc claimed to safeguard all user-held cryptocurrency in cold storage systems.

Between 2016 and 2019, ezBtc had accepted 2,300 Bitcoin and 600 Ether from investors in the cryptocurrency space.

Misallocation of $9.5M in Bitcoin and Ether to Gambling by ezBtc

According to the findings of the BCSC, roughly one-third of the clients’ assets were redirected by Smillie for personal enjoyment and gambling activities:

“Investigations reveal that in total, 935.46 Bitcoin and 159 Ether were shifted from ezBtc to personal accounts held by Smillie and/or to the gambling platforms CloudBet and FortuneJack. Such transfers to the gambling sites at times occurred directly from ezBtc, while at other times it was routed through Smillie’s personal exchange accounts before reaching the gambling platforms.”

The report by Cointelegraph further narrated that the panel stated that clients encountered “actual loss” as a result of Smillie’s and ezBtc’s deceit that prevented them from withdrawing their funds.

Expected Sanctions for ezBtc by the End of September

Diverse sanctions, including monetary fines and restrictions on engagement in the market, are anticipated to be imposed by the 24th of September, according to the legal documentation.

While neither Smillie nor any ezBtc representative were attendants at the inquiry, Smillie’s legal counsel made an appearance.

Despite the tech advancements, only 3% of Canadians have adopted Bitcoin or another cryptocurrency for everyday transactions, and this statistic has not shown significant shifts in more than two years. It’s evident that cash and credit cards remain the dominant payment methodologies for Canadians.

Among various payment methods, the survey found that most Canadians prefer e-transfer – a mechanism for dispatching funds via email or phone – to alternatives like cash and card payments.

The general resistance to relinquishing cash appears to be the primary reason behind the slow uptake of cryptocurrencies within Canada.

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