Beware of Crypto Savings Program Fraud
If you’ve been considering investing in a crypto savings program, it’s crucial to be aware of the risks involved. Recent findings have uncovered a fraudulent scheme related to securities perpetrated by ezBtc, a crypto exchange that promised a unique savings program with generous returns for customers. The exchange’s founder, David Smillie, diverted over CAD 13 million in customer assets for personal use, resulting in substantial losses for investors.
Deceptive Practices Uncovered
The British Columbia Securities Commission (BCSC) panel revealed that ezBtc and Smillie engaged in deceptive practices by misleading customers about the nature of the crypto trading platform’s services. Despite presenting itself as a legitimate platform offering high returns, ezBtc failed to safeguard customer assets and instead misappropriated funds for personal gain.
- The panel discovered that Smillie diverted approximately CAD 13 million, equivalent to $9.5 million, in customer assets for personal use.
- EzBtc, which began operations in 2016 and later ceased operations in 2019, claimed to offer a unique savings program with a 9% annual commission.
- The exchange allegedly stored over 99% of Bitcoin and Altcoins in cold storage but failed to deliver on its promises.
Founder’s Involvement in the Scam
David Smillie, the founder of ezBtc, played a central role in the fraudulent activities that led to significant financial losses for customers. As the sole director of the exchange, Smillie was responsible for the mismanagement of customer assets and failed to uphold his fiduciary duties.
- Smillie directly engaged with customers through various communication channels, including social media, text messages, and phone calls.
- Customers and staff identified him as “the owner” of ezBtc, attributing the exchange’s operations and decisions to his authority.
- The withdrawal and payment processes at ezBtc were handled manually, leading to delays and difficulties for customers trying to access their assets.
Customers’ Funds Misused
Forensic data analytics firm Integra was hired by the BCSC to investigate the misappropriation of customer funds by ezBtc and Smillie. The analysis revealed that a significant portion of the assets deposited by customers were diverted to online gambling sites and Smillie’s personal accounts on different exchanges, including Kraken and Binance.
- 223 BTC transferred from ezBtc to Smillie’s accounts were subsequently sent to gambling sites, indicating the misuse of customer funds for personal gain.
- The platform’s daily balance of BTC and ETH was found to be significantly lower than the total assets deposited by customers, raising concerns about the mismanagement of funds.
- Smillie and ezBtc were found to have contravened securities regulations by diverting customer assets for personal use, resulting in substantial losses for investors.
Hot Take: Protect Your Investments
It’s essential to conduct thorough research and due diligence before investing in any crypto savings program or exchange. The recent scandal involving ezBtc serves as a stark reminder of the risks associated with cryptocurrency investments and the importance of safeguarding your assets from fraudulent schemes.
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