The British Columbia Securities Commission (BCSC) has determined that the cryptocurrency trading platform ezBtc and its founder, David Smillie, defrauded investors of approximately $9.5 million, equivalent to 13 million Canadian dollars, in crypto assets.
The BCSC’s investigation uncovered that ezBtc and Smillie engaged in misleading and deceptive practices, misappropriating funds intended for customer accounts.
Crypto Funds Diverted for Gambling
According to the official press release shared by the Canadian regulatory agency, ezBtc began accepting customer deposits in December 2016 and ceased operations permanently around September 2019. During this period, customers deposited over 2,300 BTC and more than 600 ETH into their ezBtc accounts.
Despite claims that all crypto investments were secured in cold storage, ezBtc quickly transferred the incoming assets elsewhere. The BCSC panel found that Smillie diverted nearly a third of users’ funds for gambling and personal use. The panel concluded that the “deceit” orchestrated by the founder and the company resulted in significant losses for customers, who were unable to withdraw their assets.
“The respondents perpetrated a fraud relating to securities by lying to customers about holding their crypto assets in cold storage in ezBtc’s custody, but instead diverting 935.46 customer bitcoin and 159 customer ether for their own purpose.”
The panel has directed the executive director and the respondents to make submissions on sanctions. The executive director is to deliver submissions by September 3, 2024, with Smillie to respond by September 17, 2024.
Canada has seen its fair share of illicit activities related to crypto. For instance, Aiden Pleterski, Ontario’s ‘Crypto King,’ was arrested in May this year on fraud and money laundering charges linked to an alleged Ponzi scheme. The 25-year-old and his co-conspirator, 27-year-old Colin Murphy, allegedly defrauded around $30 million from unsuspecting victims.
However, the institutional demand in the country for crypto assets remains unfazed.
Rising Institutional Demand in Canada
A recent KPMG survey revealed a significant increase in crypto exposure among Canadian institutional investors in 2023 compared to 2021. The study, which included 65 respondents from institutional investors and financial services organizations, found that 39% of institutional investors had direct or indirect crypto asset exposure, up from 31% in 2021.
It was also found that half of the financial services firms now offer crypto services, an increase from 41% two years ago. Notably, one-third of institutional investors allocated 10% or more of their portfolios to crypto assets, reflecting a growing interest in alternative investments as hedges against inflation and economic uncertainty.
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