A BC Securities Commission (BCSC) panel has imposed $18.4 million in financial sanctions after finding that a B.C.-based crypto trading platform committed fraud by lying to its customers and diverting almost $13 million of their assets to gambling.
The panel ordered David Smillie and his company, 1081627 B.C. Ltd. operating as ezBtc, to pay a combined $10.4 million, representing the amount they obtained as a result of their wrongdoing less repayments to customers. In imposing this sanction, the panel wrote that Smillie and ezBtc “fraudulently diverted their customers’ crypto assets for their own purposes. Their deceit was blatant and repeated.” Any money collected by the BCSC toward that amount can be made available to the victims.
Smillie, who was a B.C. resident during the fraud, must also pay an administrative penalty of $8 million for his misconduct.
The platform allowed customers to buy and sell various crypto assets, telling them that 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. In total, 935.46 bitcoin and 159 ether were wrongfully obtained by Smillie and ezBtc.
The panel determined that throughout the misconduct, Smillie “blatantly and repeatedly lied to customers” and threatened customers 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, crypto currency in general, even banking to some degree.”
In addition to the financial sanctions, the panel permanently banned Smillie from participating in B.C.’s investment market, except as an investor through a registered advisor. ezBtc is likewise permanently prohibited from trading its shares or engaging in any promotional activity.
Smillie did not attend the hearing, although he was represented by a lawyer. The panel noted they have no information about his personal circumstances or his ability to pay the sanctions. The company, which was dissolved in 2022, did not participate in the proceedings.
A list of crypto trading platforms authorized to do business with Canadians is available on the website of the Canadian Securities Administrators, of which the BCSC is a member.
