Fraudulent B.C. crypto platform fined $18.4M by securities regulator
A Bitcoin ATM sticker is on the window of a shop in downtown Vancouver, on Oct. 28, 2013. (Jonathan Hayward/THE CANADIAN PRESS)
The British Columbia Securities Commission has fined a cryptocurrency trading platform and its director more than $18 million after finding the company lied to its customers by diverting nearly $13 million of their investments into gambling websites and personal accounts.
The regulator says David Smillie and his company, 1081627 B.C. Ltd., which operated as ezBtc, must repay a combined $10.4 million that the commission says was obtained through the fraud between 2016 and 2019.
As the company's director, Smillie must also pay a personal fine of $8 million for the misconduct, the regulator said in a statement Monday.
EzBtc was a trading platform that told customers they could buy and sell various crypto assets while keeping their digital holdings securely offline, protecting them from cyber threats and unauthorized access, according to the BCSC.
However, the regulator found that one-third of the customer assets on the platform were diverted to gambling websites and Smillie's personal accounts on other crypto-trading platforms.
Approximately 935.46 bitcoins and 159 units of Ethererum cryptocurrency were wrongfully obtained by Smillie and ezBtc between 2016 and 2019, the regulator said.
"The respondents' misconduct eroded trust in the capital markets," the BCSC panel wrote in its decision to impose the financial sanctions, adding that Smillie "blatantly and repeatedly lied to customers" and even threatened those who complained publicly.
One customer testified that she experienced "loss of trust in Bitcoin, for sure, crypto currency in general, even banking to some degree," the regulator added.
Smillie, who previously worked as a video editor for CTV News between 2001 and 2010, is permanently banned from participating in B.C.'s investment market, except as an investor through a registered advisor.
EzBtc is similarly prohibited from trading or engaging in promotional activity indefinitely, the BCSC said.
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