Canadian-based exchange ezBTC is guilty of misappropriating $9.5M in Bitcoin and Ether, causing significant losses and regulatory scrutiny.
The defunct crypto trading platform ezBtc is guilty of diverting CAD $13 million of client assets, translating to $9.5 million in gambling.
The case tested the crypto promise of users realizing unparalleled security and exercising control over their funds. However, the reality is turning out differently for centralized exchanges, which remain opaque about user funds control despite their popularity in crypto trading.
The challenge is playing out yet again in the Canada case where the crypto exchange ezBtc founder allegedly drained $9.5 million of users’ funds and funneled them to gambling.
Revelations in ezBtc Case
A filing by the British Columbia Securities Commission (BCSC) discloses shocking details of ezBtc founder David Smillie diverted Bitcoin and Ether customer deposits worth $9.5 million. According to the agency, the founder of the defunct Canadian crypto exchange diverted the funds in question to his gambling accounts.
One instance had the client deposit of Bitcoin sent to the gambling accounts 14 minutes after the deposit. The crypto trading platform lied to customers regarding the security of their assets.
The trading platform’s operations lasted from 2016-19 following its incorporation by David Smillie. Nonetheless, the platform halted operations in September 2019 and dissolved in 2022.
ezBtc urged clients to purchase and trade in leading cryptos, informing them that such assets were safely held within cold storage. The ABC Securities Commission (BCSC) observed that approximately a third of the crypto assets clients bought or deposited on the ezBtc platform were diverted. The crypto assets were diverted during the 2016-19 period to either the gambling platform or the founder’s accounts on other trading platforms.
ezBtc Users Lose Crypto Worth Millions
The panel noted that ezBtc lured clients by promising security deposits of over 2,300 BTC and 600 ETH during 2016-19. The BCSC panel observed that clients were unable to recover their crypto assets owing to the founder’s deceit. The unfortunate turn of events plunged the victims into actual loss.
The disclosure by the forensic data analytics firm engaged by the BCSC panel revealed that ezBtc remitted 159 ETH and 935.46 BTC to Smillie’s accounts.
Part of the proceeds was sent to a pair of gambling websites—CloudBet and FortuneJack—which misinformed clients that it was holding the assets in cold storage. The panel heard that ezBtc would conclude the transfers in record time right after the customers deposited the assets.
The BCSC commission admitted it is yet to decide on the sanctions to impose. Nonetheless, it could consider fines and bans from participation.
The ezBtc founder was absent during the hearing, though represented by a lawyer. A previous confession in May by a BCSC executive to The Canadian Press indicated the agency was yet to treat the case as criminal. Such implies Smilie would unlikely face jail time.
A mid-2023 survey by Tronto Metropolitan University involving 2,000 Canadians discovered that a third of the country’s crypto assets were victims of crypto scams. A similar disclosure by the Canadian police within Alberta City in Calgary decried the increase in crypto scams, which increased from $14 million in 2022 to $22.5 million in 2023.
Australia Bans Crypto on Gambling Sites
The shocking details of the ezBtc founder misappropriating customers’ deposits emerged two months after the Australian government banned placing online bets using digital currencies.
The regulator’s ban, announced in late 2023, granted companies six months to comply with the directive. The ban became effective in June following the window expiry, and contraventions earned online gambling portrayals $155,000 in fines for flouting the restrictions.
Australia established expanded powers for the dedicated gambling watchdog to enforce the restrictions. The new rules bar the use of digital currencies in placing online bets across the country. The limits exist for real-world gambling, though they do not extend to the lotteries owing to the low risk posed.
In support, Responsible Wagering Australia chief Kai Cantwell hailed the ban in an interview with The Canberra Times. Enforcing the ban will safeguard the customers and ease the situation for individuals seeking to control gambling behavior.
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