The Canadian crypto trading platform ezBtc and its founder, David Smillie, have been accused of defrauding customers by misappropriating around 13 million Canadian dollars (about 9.5 million USD) of their cryptocurrency investments for gambling.
A panel from the British Columbia Securities Commission (BCSC) revealed that ezBtc diverted customer funds for personal use, highlighting significant breaches of trust.
The BCSC panel found that Smillie diverted nearly one-third of users’ funds for gambling and personal expenditures.
“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”,
BCSC noted.
The panel further noted that the deceit orchestrated by Smillie and ezBtc resulted in actual losses, as customers were unable to withdraw their assets.
According to the court filings, sanctions will be imposed by September 24 and would potentially include monetary penalties or bans on market participation.
Neither Smillie nor any representatives from ezBtc attended the hearing personally; however, Smillie was represented by a lawyer.
This news comes amid recent developments in Canada where cryptocurrency trading platforms (CTPs) face a deadline to complete their paperwork and become full-fledged investment dealers. The Canadian Investment Regulatory Organization (CIRO) and Canadian Securities Administrators (CSA) have reminded CTPs that their interim operating period as restricted dealers is ending.
“Given the time that has passed, CSA members expect CTPs to have carefully reviewed and understood the requirements to become investment dealers and CIRO members, and be actively engaged with CIRO on their applications”,
the reminder read.
Regulators also noted that new CTPs will not be granted an interim period before CIRO membership. In addition to obtaining CIRO membership, CTPs must register individually in each jurisdiction. Currently, there are 15 CTPs operating in Canada.
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