Founder of Canadian Cryptocurrency Exchange Involved in Embezzlement Scandal
The founder of now-defunct Canadian cryptocurrency exchange ezBtc has been found guilty of embezzling user funds. The exchange reportedly sent users’ funds to gambling sites. An investigation led by Canada’s provincial regulator, the British Columbia Securities Commission (BCSC), found that ezBtc misused customer funds for its own purposes between 2016 and 2019.
Misuse of Funds for Gambling Purposes
The BCSC claims that ezBtc’s founder, David Smillie, redirected funds from the exchange to two gambling platforms, CloudBet and FortuneJack, totaling 13 million Canadian dollars. The investigation revealed that significant amounts of Bitcoin and Ethereum were transferred from the exchange account to Smillie’s trading account and then to the gambling platforms, compromising a third of the total user assets.
Bitcoin traffic from ezBtc to Smillie’s trading accounts corresponds to Bitcoin traffic from these accounts to CloudBet and FortuneJack. As more Bitcoins were sent from ezBtc to Smillie’s trading account, more were further sent to the gambling websites.
Despite claiming to have 99% of funds stored in cold storage, ezBtc’s Bitcoin and Ethereum wallet daily balances never exceeded 11 Bitcoin and 20 Ethereum, according to the BCSC’s findings.
Collapse and Financial Losses
The Vancouver-based exchange operated for three years before ceasing operations in 2019. Multiple customers who had deposited large amounts of Bitcoin found themselves unable to withdraw their funds, amounting to 595 BTC in total. Promised investment returns of up to 9% never materialized, leading to significant financial losses for users.
Several customers attempted to recover their locked funds from Smillie, but their efforts were met with false assurances and ultimately ignored by him. As a result, customers faced actual losses as they were unable to access their funds.
In conclusion, the BCSC deemed Smillie and ezBtc’s actions as deceptive and harmful to customers, potentially resulting in monetary sanctions and other restrictions for Smillie.
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