Securities Commission Discovers Crypto Company Redirected $13 Million in Assets

A decision has been reached by a panel of the British Columbia Securities Commission that a crypto exchange platform and its founder engaged in deceptive practices by misinforming its users and misappropriating approximately $13 million in funds for gambling and personal use.

The regulatory board discovered that ezBtc, the platform run by then-resident of British Columbia, David Smillie, assured clients that their bitcoins would be preserved in “cold storage” – a safer method of storing cryptocurrency offline.

However, the findings of the panel indicate that from 2016 to 2019, roughly a third of the total cryptocurrencies that customers entrusted to ezBtc were in fact siphoned to gambling platforms or to the personal trading accounts of Smillie on various other cryptocurrency exchanges.

A statement released by the commission on Monday noted that a specialized forensic data analytics company was enlisted to trace the digital currency movement, revealing that the funds were “swiftly moved” to personal accounts belonging to Smillie or to two online gambling portals.

The panel concluded that Smillie not only played a pivotal role in governing ezBtc’s actions but also sanctioned the firm’s improper conduct, making him equally culpable for the platform’s transgressions.

Despite ezBtc’s dissolution in 2022 and its absence from the hearing, as well as Smillie’s own non-attendance (though he was defended by legal counsel), the commission remains resolute.

Previously in May, Doug Muir, the director of enforcement for the B.C. Securities Commission, informed The Canadian Press that the issue is of administrative concern and not criminal – indicating that neither the platform nor Smillie are facing incarceration. Instead, they may be subject to financial penalties or exclusion from the securities market depending on whether the commission can successfully substantiate its claims.

The panel from the commission is poised to deliberate on the appropriate sanctions to impose, which may encompass financial repercussions or prohibitions from engaging in market activities.