As a seasoned crypto investor with over a decade of experience in this volatile market, I can’t help but feel a sense of disillusionment upon reading about the ezBtc debacle. The fact that a platform promising safe and lucrative investments turned out to be a scam is all too familiar a narrative for many of us who have been in this space for some time.
More recently, a panel appointed by the British Columbia Securities Commission (BCSC) has determined that crypto exchange ezBtc is accountable for swindling users out of approximately CAD 13 million worth of Bitcoin (BTC) and Ether (ETH) from 2016 to 2029. The founder of the exchange misused the funds, resulting in financial harm to investors.
Crypto Savings Program Turns Out Scam
According to the BCSC’s findings, ezBtc and its creator, David Smillie, were involved in a “securities fraud” by misleading clients about the crypto trading platform’s offerings. The panel concluded that Smillie misused approximately CAD13 million (equivalent to around $9.5 million) of customer funds for personal use.
In 2016, EzBtc debuted as a cryptocurrency trading platform, distinguishing itself through a special savings program. This program enables clients to securely earn a yearly return of approximately 9%, with the reward distributed on a daily basis.
The platform, initially active from 2016 to 2019 but ultimately discontinued in 2022 after going offline in September 2019, boasted about keeping more than 99% of Bitcoin and other cryptocurrencies in ‘cold storage’. As per the court records, users deposited approximately 2,300 Bitcoins and over 600 Ethereums into ezBtc during this period, which are now valued at around $138 million for Bitcoins and $1.62 million for Ethereums respectively.
Smillie served as the single director for ezBtc, a role he held within the company’s records until its closure two years back. Furthermore, he was designated as the signing authority for ezBtc at two different financial organizations.
According to the given document, the CEO and founder frequently communicated with customers using various platforms such as social media, text messages, phone conversations, and emails. Both customers and employees often addressed him informally as “the owner.”
In the interactions between Testifying Customers and ezBtc, Smillie’s name was frequently brought up. Additionally, some individuals who filed complaints with the commission also referred to Smillie.
It appears that transactions, both deposits and withdrawals, were handled manually, resulting in a waiting period of 7-10 days for standard withdrawals. The customers who testified reported varying levels of success when attempting to withdraw their crypto or cash, but ultimately, none of them could successfully take out the assets they had stored on the exchange.
Testimony reveals that Smillie handled significant Bitcoin transfers. In 2017, he deposited 595 BTC into the exchange and subsequently sold some for approximately $73,000. However, he failed to receive the payment. At a later point, the customer successfully withdrew 25 BTC from the platform, which led to an interaction with Smillie on another exchange.
In a different turn of events, when the user attempted to withdraw his remaining funds, the platform’s creator claimed that the site had been breached, resulting in the loss of 484 BTC. During subsequent court proceedings, three other users disclosed similar issues they encountered with the cryptocurrency exchange and Smillie.
Customers’ Funds Used For Gambling
The BCSC contracted Integra, a forensic data analytics company, to investigate the location of users’ funds using Blockchain analysis. After analyzing the BTC and ETH transactions made by users, Integra discovered that ezBtc did not hold customers’ assets in their corresponding Bitcoin and Ethereum wallets.
According to our investigation findings, some of the cryptocurrencies deposited into the exchange were swiftly moved to various online gaming platforms and Smillie’s accounts on multiple exchanges, like Kraken and Binance.
In a similar fashion, it appears that the 223 BTC previously moved from ezBtc to Smillie’s exchange platforms were subsequently deposited into CloudBet and FortuneJack. This pattern suggests that Smillie potentially utilized funds from ezBtc to finance his gambling activities on these specific sites.
Additionally, Integra found out that the day-to-day Bitcoin (BTC) and Ethereum (ETH) holdings on the system never surpassed 11 Bitcoins and 20 Ethers respectively.
The investigative body determined that the exchange and Smillie were involved in a securities fraud, which involved misusing approximately 935.46 Bitcoins belonging to customers and 159 Ether for their personal gain. This action violated section 57(b) of the Securities Act, and ezBtc and its owner are anticipated to face penalties next month.
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2024-08-14 15:12