A crypto firm allegedly cheated investors by diverting funds for crypto gambling. The owner will face a breach of securities laws if found!(Image by Tumisu from Pixabay)
A crypto exchange operating under The British Columbia Securities Commission (BCSC) has come under fire from the regulatory authority for misleading customers.
ezBTC is a Vancouver-based British Colombia registered crypto exchange that tried to beat the system, but thanks to careful regulations and an ever-vigilant eye, it seems the firm couldn’t pull the wool over the eyes of the BCSC, which caught the crypto company red-handed.
As far as I can make out from the latest developments in the investigation, ezBTC allegedly told its clientele it stored private funds in secure cold storage that did not exist. Instead, those funds ended up circulating in crypto casinos.
Whether these were casinos owned by the exchange so it could pay winning customers or if the funds were gambled on these casinos, is a complete mystery. It seems this side of the story in the many news outlets reporting it does not mention what happened to the funds. However, what is clear, customers of ezBTC have not been able to retrieve their crypto. The site, ezBtc.ca, closed in November 2019 and investors no longer had access.
Are the crypto sites receiving ezBTC funds involved? The crypto casinos receiving funds from ezBTC have not been mentioned. I would therefore say they were not involved and requested their brand name be kept out of the equation. In all probability, the owner of ezBTC likely had a heavy gambling problem.
Who owned ezBTC and what did he do with the crypto assets?
The owner and the sole director of the Canadian crypto exchange is David Smillie. The company operated under 1081627 B.C. Ltd, and it came into operation in 2016. Originally the start-up was based out of Vancouver and subsequently moved to Nanaimo, which is around a 2 and half-hour drive from Vancouver or 81Kms accessible over the Trans-Canada Hwy by ferry via Horseshoe Bay, West Vancouver.
Little hope of reimbursement: Since he moved and the crypto exchange shut down, no one has seen or heard from Mr Smillie. Ex-customer on Discord, Reddit, and other media platforms have said emails simply bounce back and the phone number for ezBtc is no longer in service.
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What is the Extent of the Damage?
It is not pretty! During the exchange’s 3+ years of operations, ezBtc had around 13,000 crypto wallets opened by customers. The total number of Bitcoin supposed to be ‘cold storage’ was 2,300 BTC. For Ethereum, the number was around a quarter of this amount – 600 ETH.
Where things didn’t add up was when the BCSC realised that the company’s wallets never stored more than 11 BTC or 20 ETH at one time. A far cry from the amounts that were supposed to be available on demand, but combined with deposits, it was likely enough to keep withdrawals ticking over without raising any suspicion.
According to reports across Canada, the total sent to crypto casinos is said to be C$13 million, presumably gambled away already by Mr Smillie already. What a whale he must have been!
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What is Next for Customer and the BCSC?
At this time the BCSC has not yet put in a guilty verdict on David Smillie. The limited company protection does not cover his alleged negligence from fraud.
He has until 27 June 2023 to claim his innocence. As the phone is disconnected, the website is down, and the email address is shut down according to popular social and community online networks, it seems there is little chance of the company coming forward.
The charges: Breaking securities laws since the terms and conditions provided to investors were broken. In the eyes of the BCSC, this is a breach of contract in relation to futures contracts and/or securities.
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