ezBTC turned out to be fraudulent, causing significant financial losses for many investors. BCSC panel is poised to execute judgement.
Canadian securities regulator the British Columbia Securities Commission (BCSC) has charged location crypto exchange, ezBtc, and its founder David Smillie with fraud.
The regulator alleged that the exchange misled customers about the safety of their assets, with over $9 million worth of customer funds misused.
ezBtc promised customers that their crypto assets would be stored in “cold storage.” This means they will not be tampered with but instead kept in a secure offline storage system. However, the Canadian securities regulator found that this was not the case. About $9.4 million of customer funds were diverted to Smillie’s personal accounts or gambling websites.
The BCSC noted that the investigation was conducted with the help of an undisclosed forensic data analytics firm. This uncovered some suspicious transactions and asset diversions. Customer assets were quickly diverted, with one transaction occurring just 14 minutes after the deposit.
The regulatory panel implied that these acts were intentional and led by Smillie. “By authorizing, permitting, or acquiescing in ezBtc’s misconduct, Smillie committed the same misconduct as the platform,” the BCSC said in a release.
Notably, the probed transactions were made over three years, between 2016 and 2019. ezBtc became defunct in 2022 as its users reported their inability to withdraw assets to the regulators. This resulted in BCSC halting the company’s operations.
Following the investigations, the panel will consider imposing sanctions on Smillie and ezBtc which may include monetary penalties and bans from market participation. Such cases have also led to the imprisonment of the founders, like in the case of Sam Bankman-Fried of FTX.
The discovery of ezBtc fraud further proves the immutability and transparency of blockchain transactions. It also shows that bad actors will hardly escape the arm of the law.
In the growing cryptocurrency industry, regulatory compliance is important for building trust and ensuring the long-term success of cryptocurrency exchanges and trading platforms. By prioritizing transparency and accountability, crypto businesses can help maintain a secure and reliable environment for their investors.