Crypto Trading Platform Diverted Customer Assets into Gambling Sites
A defunct Canadian cryptocurrency trading platform, ezBtc, has been found guilty of diverting $9.5 million (CAD $13 million) of customer assets into gambling sites and lying to customers. The platform, which was operational between 2016 and 2019, was based in British Columbia and run by founder David Smillie. Despite assuring customers that their assets were held in cold storage, a significant portion of the crypto assets deposited or acquired by customers on the platform were redirected to gambling sites or Smillie’s personal accounts on other crypto trading platforms.
Deceitful Practices and Losses for Customers
- The B.C. Securities Commission (BCSC) panel determined that approximately one-third of all crypto assets deposited with ezBtc or transacted on the platform during the 2016-2019 period were funneled to gambling websites or Smillie’s personal accounts.
- Customers were unable to recover all of their assets due to these deceptive practices, resulting in actual financial losses.
- Despite customer assurances of cold storage, 935.46 Bitcoin and 159 Ethers were transferred to Smillie’s accounts or gambling websites like CloudBet and FortuneJack.
Swift Asset Transfers and Lack of Sanctions
- Transfers to gambling sites occurred rapidly, with assets redirected within minutes of deposits. Some customers witnessed their Bitcoin being sent to a gambling site just 14 minutes after making a deposit.
- The BCSC is yet to decide on the appropriate sanctions for ezBtc, which could range from fines to market participation bans.
- Though the firm’s founder did not attend the hearing and was represented by legal counsel, the case is not being treated as criminal, indicating potential absence of jail time for Smillie.
Rising Concerns and Scams in the Canadian Crypto Space
- A 2023 survey conducted by Toronto Metropolitan University revealed that one-third of digital asset owners in Canada have fallen victim to crypto-related scams, reflecting growing risks in the sector.
- In Alberta’s city of Calgary, reports from Canadian police indicated a significant increase in losses due to crypto scams among residents, rising from $14 million in 2022 to $22.5 million in 2023.
Hot Take: Stay Cautious to Avoid Crypto Scams
As a crypto investor, it is crucial to remain vigilant and exercise caution when engaging in cryptocurrency transactions. The case of ezBtc serves as a stark reminder of the risks involved in the digital asset space and the importance of conducting thorough due diligence before entrusting funds to any platform or individual. By staying informed and adopting best practices for security and transparency, you can mitigate the potential for falling victim to scams and fraudulent activities in the crypto market.
Sources:
– Toronto Metropolitan University Survey
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