The Canadian cryptocurrency trading platform, ezBtc, and its founder, David Smillie, have been found guilty of misappropriating approximately 13 million Canadian dollars (equivalent to $9.5 million) of their customers’ cryptocurrency investments. The funds were used for personal expenses, including gambling.

Canadian Crypto Founder ScandalDavid Smillie, the mastermind behind a Canadian crypto project, swiped $9.5 million from investors and blew it on gambling.The BCSC revealed that he funneled 935.46 BTC and 159 ETH into his own accounts and betting sites.With ezBtc going under… pic.twitter.com/tYltyYwu0F

— Mario Nawfal’s Roundtable (@RoundtableSpace) August 13, 2024

ezBtc Betrayed Users’ Trust

Operating between 2016 and 2019, ezBtc attracted significant investments, amassing over 2,300 Bitcoin (BTC) and more than 600 Ether (ETH) from its users. The platform claimed that all user funds were securely stored in cold storage. However, in September 2019, ezBtc went offline permanently, and by 2022, it had been officially dissolved.

Shockingly, a government investigation by the British Columbia Securities Commission exposed that a company was secretly draining users’ accounts, making off with almost a third of their money. The culprits siphoned off 935.46 Bitcoins and 159 Ethers, using it to fund their own lavish spending and online gambling habits on sites like CloudBet and FortuneJack. Talk about a betrayal of trust.

The panel highlighted that these transfers were sometimes made directly from ezBtc accounts and, in other cases, were routed through Smillie’s personal exchange accounts. “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,” they wrote.

The timeline is set

The “deceit” orchestrated by Smillie and ezBtc “led to actual loss” as customers could not withdraw their assets, the panel added. By September 24, the court will decide on penalties, which could include fines or even bans from trading in the market.

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

Despite the hype, crypto adoption in Canada has been stuck in neutral for over two years. Only a tiny 3% of Canadians are using Bitcoin or other cryptocurrencies for everyday purchases, like a nation of cash and card lovers. The main reason crypto hasn’t taken off here is that many of them are simply hesitant to give up their wallets and go fully digital.

Chart showing adoption of alternatives to cash and cards in Canada. Source: Bank of Canada

This incident with ezBtc may further dampen the enthusiasm for cryptocurrencies in Canada. However, it also points to the urgent need for stronger regulations and safeguards to protect investors and maintain trust in this blossoming financial sector.

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