The B.C. Securities Commission recently alleged that a defunct cryptocurrency platform based in Nanaimo on Vancouver Island allegedly carried out a massive securities fraud by intentionally and illegally diverting customer funds to crypto gambling websites.
In a notice issued in April 2023, the Commission said that David Smillie and his numbered firm, which reportedly conducted business as ezBtc, had intentionally lied to clients regarding its crypto trading platform/services.
The Commission says that Smillie and the firm had allegedly diverted around $13 million worth of Bitcoin (BTC) and Ethereum (ETH) to various online gambling websites without prior authorization from users.
The regulator also mentioned that the firm had been dissolved back in October of last year, however, between 2016 and 2019 clients reportedly sent 2,300 Bitcoin and 600 ETH into digital wallets that were hosted by the exchange platform.
Smillie and the company reportedly told clients that their crypto holdings were mainly held off-line in cold storage wallets, however, they never actually maintained adequate funds in order to cover customers’ assets.
As noted in the announcement, Smillie and ezBtc had not been registered under B.C.’s Securities Act. The Commission added that agreements with clients were essentially futures contracts, which come under the Commission’s jurisdiction.
Court records searches indicate that the firm and Smillie are facing various lawsuits in British Columbia that are going back a few years, and that the B.C. Securities Commission’s director of enforcement Doug Muir noted that the notice has come after an extensive investigation into the company’s operations.
Muir stated:
“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 further noted that the issue is administrative and not a criminal case, which means that the company as well as Smillie will apparently not be facing potential jail time. However, they could face various monetary penalties/fines or get banned from public markets if the Commission is able to prove the case against the defendants.
Const. Gary O’Brien with the Nanaimo RCMP revealed that the detachment’s investigation into the firm back in 2019 was unable to find proper/adequate evidence to bring forth criminal charges.
O’Brien added:
“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.”
O’Brien also mentioned that the case may be reopened if any victims or the securities commission reach out to investigators with additional information.
Sergei Goshko, an Ontario-headquartered software engineer, claims that he had used the ezBtc platform for crypto trading until it had stopped giving him access to his funds before its official website “disappeared completely.”
Goshko had reportedly filed a lawsuit in B.C. Supreme Court back in 2021 via a numbered firm, and he noted that he may have lost around $80,000.
His lawyers were not able to find Smillie and he was not aware that the B.C. Securities Commission had been taking action against ezBtc as well as its founder.
Goshko further noted:
“I guess it’s a good thing, so maybe there’ll be some progress. Maybe they will finally find him.”