The British Columbia Securities Commission (BCSC) has wrapped up its investigation into an alleged $13-million fraud involving a now-defunct cryptocurrency trading platform based in Nanaimo, ezBtc.
ezBtc and its founder, David Smillie, have been accused of defrauding customers by misappropriating around 13 million Canadian dollars ($9.5 million) of their cryptocurrency investments.
The platform, which claimed to store users’ crypto investments in cold storage, went offline in 2019 and was dissolved in 2022.
During its operation, ezBtc amassed over 2,300 Bitcoin and more than 600 Ether from investors. The BCSC panel revealed that nearly one-third of these funds—935.46 Bitcoin and 159 Ether—were diverted to Smillie’s exchange accounts or used for gambling.
Despite ezBtc’s assertion that “over 99 percent” of customers’ crypto assets were stored in “cold storage” or offline, the commission says that the company did not actually hold these assets and that many of the displayed holdings were fictitious.
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The panel noted that Smillie’s actions led to massive losses, preventing customers from withdrawing their assets. Sanctions against Smillie are expected to be imposed by September 24 and could include monetary penalties and market participation bans.
The probe also revealed that the platform’s daily balance between 2016 and 2019 did not exceed 11 bitcoin and 20 Ether, leading to customers being unable to withdraw the assets they believed were stored on the platform.
Smillie did not attend the hearing but was represented by a lawyer.
Meanwhile, crypto adoption in Canada remains sluggish, with only 3% of the population using digital currencies for daily transactions, as Canadians continue to favor cash and card payments.
Earlier in May, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) imposed a hefty fine on Binance for non-compliance with money laundering regulations.
The regulatory body cited two specific breaches: Binance’s failure to register as a foreign money services business and its failure to report a single virtual currency transaction exceeding $10,000.
Binance said earlier that the new guidance issued for cryptocurrency exchanges in Canada, which relates to stablecoins and investor limits, has made it “no longer tenable” for the company to operate in the country.
