The former operator of a now-closed cryptocurrency exchange in British Columbia has been ordered to pay $18.4 million in fines. Authorities found that the individual misused customer funds, spending their bitcoin, which was meant to be secure, on gambling sites. (Kin Cheung/The Associated Press)
The British Columbia Securities Commission (BCSC) has imposed an $18.4 million fine on David Smillie, the operator of the now-defunct cryptocurrency exchange ezBtc, after uncovering a massive fraud scandal. Smillie and his company were found guilty of misleading customers and misusing their funds, with much of the money funnelled into online gambling and personal accounts.
Among those impacted is Ottawa resident Shawn Murfitt, who spent years attempting to recover $31,524.39 lost in the scam. Despite winning a small claims court case, Murfitt has seen no meaningful resolution. He only recently learned about the substantial penalty imposed on Smillie and expressed disappointment that affected customers might never recoup their losses.
The BCSC’s findings reveal that between 2016 and 2019, ezBtc lured investors with promises of secure storage and guaranteed returns. Smillie claimed the platform’s focus was “cold storage” – a secure method of keeping cryptocurrency offline. However, investigators discovered that over 935 bitcoins and 159 ether, valued at $13 million at the time of their disappearance, were diverted from customer accounts. Smillie had reassured clients their assets were safe while secretly transferring funds to gambling platforms like CloudBet and FortuneJack.
The fraud unravelled in 2019 when ezBtc abruptly shut down amid growing rumours of missing funds. Many customers reported difficulty accessing their money, with none able to withdraw the full amounts promised. Smillie’s defense lawyer argued that his client was ill and financially incapable of attending hearings, but these claims were dismissed by the regulator due to a lack of evidence.
One investor testified that he lost 484 bitcoins deposited in 2017 when the cryptocurrency was worth $1,700 each. Today, each bitcoin is valued at over $133,000, exponentially amplifying the financial blow. This investor admitted the increasing value of Bitcoin only deepened the emotional strain, eroding his trust in cryptocurrency trading platforms.
Murfitt’s own losses also highlight the immense financial impact. His $30,000 investment in December 2017, when Bitcoin was valued at $12,000, would now be worth over ten times as much. For him and others, the scandal represents not only a financial loss but a significant blow to faith in an industry already fraught with risk.
The BCSC calculated the $18.4 million fine by assessing customer losses and an additional $8 million administrative penalty. Despite denying allegations of fraud, the commission described Smillie’s actions as deliberate and deceptive, causing significant harm to investors who trusted his platform.
This case serves as a stark warning about the risks of cryptocurrency trading and the need for due diligence. The lure of quick profits can often obscure the dangers of trusting unregulated platforms. The penalty offers little solace for those affected, as the stolen funds and shattered trust may never be restored.
