Canadian cryptocurrency platform ezBtc was exposed that its founder David Smillie misappropriated customer funds for gambling

The British Columbia Securities Commission (BCSC) has revealed that the Canadian cryptocurrency platform ezBtc and its founder, David Smillie, misappropriated customer investments totalling approximately 13 million Canadian dollars ($9.5 million). The funds were redirected for gambling and personal use.

Misleading Claims

EzBtc, which operated from 2016 to 2019, claimed to store all customer assets in cold storage. However, the BCSC found that this was not the case. Instead, nearly one-third of the platform’s holdings—935.46 Bitcoin and 159 Ether—were transferred to Smillie’s personal exchange accounts and gambling websites such as CloudBet and FortuneJack.

“We find that in aggregate, 935.46 Bitcoin and 159 Ether were transferred by ezBtc to Smillie’s exchange accounts and/or to CloudBet and FortuneJack. The transfers to the two gambling websites were sometimes direct from ezBtc, and sometimes indirect from ezBtc to Smillie’s exchange accounts and then to the gambling websites.”

Customer Losses

The deceit resulted in substantial losses for customers, who were unable to withdraw their assets when the platform went offline in September 2019. EzBtc was formally dissolved in 2022.

Pending Sanctions

Sanctions against Smillie and ezBtc are expected to be imposed by September 24, 2024. These may include monetary penalties and market participation bans. Smillie did not attend the hearing but was represented by legal counsel.

Sanctioning timeline for ezBtc founder David Smillie. Source: The British Columbia Securities Commission

Canada's Crypto Hesitance

In a broader context, cryptocurrency adoption in Canada has remained low, with only 3% of the population using digital currencies for daily transactions. The reluctance to go cashless, combined with a preference for traditional payment methods like cash, cards, and e-transfers, has contributed to the slow uptake.

Adoption of alternatives to cash and cards in Canada. Source: Bank of Canada

Objective Assessment

The handling of customer funds by ezBtc raises serious concerns about the platform’s integrity and transparency, casting a shadow over its operations and the broader perception of cryptocurrency security in Canada.