According to Cointelegraph: The British Columbia Securities Commission (BCSC) has uncovered a significant fraud involving the Canadian cryptocurrency trading platform ezBtc and its founder, David Smillie. As per BCSC report, ezBtc and Smillie misappropriated approximately 13 million Canadian dollars ($9.5 million) of customer funds, using them for personal expenses, including gambling.

Misappropriation of Customer Funds

The BCSC panel revealed that during its operation from 2016 to 2019, ezBtc accumulated over 2,300 Bitcoin (BTC) and more than 600 Ether (ETH) from investors. Despite claims that these assets were securely stored in cold storage, it was found that nearly one-third of the users' funds were diverted by Smillie for personal use and gambling.

Specifically, the panel reported that 935.46 BTC and 159 ETH were transferred from ezBtc accounts to Smillie’s exchange accounts and then to online gambling sites such as CloudBet and FortuneJack. In some instances, the funds were transferred directly from ezBtc to these gambling websites, further compounding the misuse of customer assets.

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

Consequences and Sanctions

The deceitful actions of Smillie and ezBtc resulted in substantial losses for customers, who could not withdraw their assets. The BCSC panel highlighted that the misappropriation led to real financial harm for the affected users.

Sanctions against David Smillie will be imposed by September 24, 2024. These could include monetary penalties and bans on participation in financial markets. Despite the seriousness of the allegations, Smillie did not personally attend the hearing, though legal counsel represented him.

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

Crypto Adoption in Canada: A Slow Progress

The case of ezBtc underscores some of the challenges facing the crypto market in Canada. Despite the initial interest in cryptocurrencies, overall adoption in the country has remained stagnant, with only about 3% of the population using Bitcoin or other cryptocurrencies for everyday transactions.

Canadians continue to favor traditional payment methods such as cash and cards, with alternatives like e-transfers being more popular than digital currencies. The general reluctance to move towards a cashless society is cited as a primary reason for the slow adoption of cryptocurrencies in Canada.

This incident serves as a cautionary tale for investors and highlights the importance of regulatory oversight in protecting consumers in the rapidly evolving crypto space.