BC Securities regulator accuses defunct crypto platform of committing multi-million dollar fraud

BC Securities regulator accuses defunct crypto platform of committing multi-million dollar fraud

The British Columbia Securities Commission has accused ezBtc, a defunct Nanaimo-based cryptocurrency platform, and its founder David Smillie of perpetrating a multimillion-dollar securities fraud scheme.

The commission alleged that Smillie and his crypto firm lied to customers about the platform and diverted their assets to online gambling sites.

ezBtc allegedly diverted $13 million in customer assets

According to a Bloomberg report, the allegations were outlined in a hearing notice issued last month. The BC Securities Commission accused Smillie and ezBtc of moving $13 million worth of user assets, including Bitcoin (BTC) and Ether (ETH), to virtual gambling sites without the owners' permission.

While ezBtc ceased operations in October 2022, users moved 2,300 BTC and 600 ETH tokens into the platform's wallets between 2016 and 2019. The company's founder allegedly told investors that their assets were often kept offline in cold storage. However, the company never had enough assets to cover users' funds.

Furthermore, ezBtc has never been registered with the BC Commission, and the agency claims that the company's agreements with users fell under futures contracts that fall under its jurisdiction.

The founder of ezBtc has to pay fines

After further investigation, the BC Commission found that ezBtc and Smillie faced numerous lawsuits several years ago. Constable Gary O'Brien of the Royal Canadian Mounted Police (RCMP), which previously facilitated the lawsuits, said the police investigation into ezBtc in 2019 did not produce enough evidence to file criminal charges.

"All I can say is that the matter was under investigation and the lead investigator had not gathered enough evidence to pursue criminal matters, so they decided it would probably be best to proceed from a civil standpoint. That is the only information I can provide at this time," the constable said.

On the other hand, Securities Commission Director of Enforcement Doug Muir revealed that there has been a lengthy investigation into ezBtc, hence the hearing notice.

"In this case, as in all of our cases, we need time to investigate, so we need to be able to collect evidence that we are satisfied with. So collecting takes time. Our investigations are often time-consuming and complex, and this is an example of that," Muir said.

The regulator further revealed that the case is not a criminal case but an administrative one, adding that the parties involved may face fines or bans from public markets instead of serving prison sentences.

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