The British Columbia Securities Commission has accused ezBtc, a defunct Nanaimo-based cryptocurrency platform, and its founder David Smillie, of perpetrating a multimillion-dollar securities fraud scheme.
The commission alleged that Smillie and his crypto firm lied to customers about the platform and diverted their assets to online gambling sites.
According to a Bloomberg report, the accusations were outlined in a notice of hearing issued last month. The B.C. Securities Commission accused Smillie and ezBtc of moving $13 million worth of users’ assets, including bitcoin (BTC) and ether (ETH), to virtual gambling sites without authorization from the owners.
While ezBtc ceased operations in October 2022, users moved 2,300 BTC and 600 ETH tokens into the platform’s wallets between 2016 and 2019. The company’s founder allegedly told investors their assets were often kept offline in cold storage. However, the firm never had enough assets to cover users’ funds.
In addition, ezBtc was never registered with the B.C. commission, and the agency claims that the company’s agreements with users fell under futures contracts, which are within its jurisdiction.
Upon further investigation, the B.C. commission found that ezBtc and Smillie faced numerous lawsuits several years ago. Constable Gary O’Brien of the Royal Canadian Mounted Police (RCMP), which facilitated the suits before, said the force’s investigation into ezBtc in 2019 did not yield enough evidence to file criminal charges.
“All I can say is that the matter was investigated, and there was insufficient evidence gathered by the primary investigator to pursue criminal matters, so they decided it would probably be best to go from a civil angle. That’s the only information that I could provide at this point,” the constable said.
On the other hand, the securities commission director of enforcement Doug Muir disclosed that there had been a lengthy probe into the ezBtc, hence the hearing notice.
“In this case, like in all of our cases, we need time to investigate, so we need to be able to gather evidence that we are satisfied. So, that takes time to gather. Our investigations are often time consuming and complex and this one is an example of that,” Muir said.
The regulator further revealed that the case is not criminal but administrative, adding that the involved parties may face monetary penalties or prohibitions from public markets instead of serving jail terms.