Canadian crypto exchange gambled away $9.5M users’ Bitcoin and Ether

The Canadian cryptocurrency trading platform ezBtc and its founder, David Smillie, defrauded customers by misappropriating approximately 13 million Canadian dollars ($9.5 million) of their cryptocurrency investments and using the funds for gambling.

A panel set by the British Columbia Securities Commission (BCSC), a provincial regulator in Canada, found that ezBt misappropriated customer funds “for their own purposes.”

The ezBtc platform, which went offline permanently in or around September 2019 and was dissolved in 2022, had claimed to store all its users’ crypto investments in cold storage.

During its time of operation, between 2016 and 2019, ezBtc amassed over 2,300 Bitcoin (BTC) and over 600 Ether (ETH) from crypto investors.

ezBtc diverted 935.46 Bitcoin and 159 Ether for personal use and gambling

According to the BCSC panel, Smillie diverted nearly one-third of users’ funds for gambling and personal use:

“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.”

The panel further noted that the “deceit” orchestrated by Smillie and ezBtc “led to actual loss” as customers could not withdraw their assets.

According to the court filing, sanctions will be imposed by Sept. 24, and they could range from monetary sanctions to bans on market participation.

Smillie and ezBtc representatives did not personally attend the hearing, but the founder was represented by a lawyer.

Sluggish crypto adoption in Canada

Overall crypto adoption in Canada has remained stagnant for over two years, with just 3% of the population using Bitcoin or other cryptocurrencies for day-to-day payments. Instead, Canadians have shown a strong preference for cash and card payments.

Of the many other alternatives to cash and cards, most Canadian respondents preferred using e-transfer, a method of transferring money using email addresses or phone numbers.

The primary reason for the slow adoption of cryptocurrency in Canada is the general reluctance to go cashless.