The B.C. Securities Commission issued the hefty penalties after finding David Smillie committed fraud on his ezBtc crypto trading platform
A former B.C. resident has been fined $18.4 million for using millions of customers’ deposits to his cryptocurrency trading platform on gambling.
The B.C. Securities Commission found David Smillie and his company, 1081627 B.C. Ltd. operating as ezBtc, committed fraud by diverting nearly $13 million in customer assets to gamble.
The fines against Smillie and the company was $10.4 million — the amount diverted, minus repayments to customers — and Smillie is also ordered to pay an $8 million administrative penalty for the misconduct.
Whatever money is collected will be made available to victims, though the securities commission admitted the status of Smillie’s finances and what’s left of the company’s assets is not known.
The company’s crypto trading platform allowed customers to buy and sell various assets and told them their digital holdings would be held offline, a more secure method of keeping digital assets to protect them from cyber threats and unauthorized access.
“Instead, approximately a third of all the crypto assets that customers deposited with ezBtc or acquired on the ezBtc platform between 2016 and 2019 were diverted to gambling sites or to Smillie’s personal accounts on other crypto trading platforms,” said the commission in a statement Monday.
In total, 935.46 bitcoin and 159 ether were wrongfully obtained by Smillie and ezBtc.
The panel said Smillie “blatantly and repeatedly lied to customers” and threatened those who complained publicly.
”In this case, the respondents’ misconduct eroded trust in the capital markets,” the panel said. One customer testified that she experienced “loss of trust in bitcoin for sure, cryptocurrency in general, even banking to some degree.”
As part of its decision, the panel permanently banned Smillie from participating in B.C.’s investment market, except as an investor through a registered adviser. The company ezBtc is also permanently prohibited from trading in its shares or any promotions.
Smillie was represented by a lawyer at the hearing but did not attend. The panel said it has “no information about his personal circumstances or his ability to pay the sanctions.” The company was dissolved in 2022 and did not take part in the proceedings.