The British Columbia Securities Commission (BCSC) has levied an $18.4 million fine against David Smillie, a former B.C. resident, for fraudulently misusing customer deposits from his cryptocurrency trading platform, ezBtc.
Smillie and his company, 1081627 B.C. Ltd., operating under the brand ezBtc, were found guilty of diverting nearly $13 million of client assets to fund gambling activities. In a decision delivered earlier this year, the BCSC imposed a $10.4 million penalty, representing the misappropriated funds minus repayments made to clients, alongside an $8 million administrative fine for misconduct.
Deceit and Fraud Unveiled
According to the commission, Smillie’s actions were marked by repeated deception. A panel concluded, “Smillie and ezBtc fraudulently diverted their customers’ crypto assets for their own purposes. Their deceit was blatant and repeated.”
The investigation revealed that between 2016 and 2019, approximately one-third of the cryptocurrency deposited by customers or acquired on the ezBtc platform was redirected to gambling sites or personal accounts on other crypto platforms. A total of 935.46 Bitcoin and 159 Ether were misappropriated.
The platform, which allowed clients to trade various cryptocurrencies, had promised to secure digital assets offline—a method widely regarded as a safeguard against cyberattacks and unauthorized access. However, the company’s assurances proved false as funds were secretly funneled away.
Loss of Trust in the Market
The fallout from Smillie’s misconduct extended beyond financial losses, eroding public confidence in cryptocurrencies and financial markets. One customer testified to the panel, saying, “It caused a loss of trust in bitcoin for sure, cryptocurrency in general, even banking to some degree.”
The panel also noted that Smillie threatened clients who voiced concerns publicly, further compounding the harm. “In this case, the respondents’ misconduct eroded trust in the capital markets,” it concluded.
Lifetime Ban and Uncertain Recovery
As part of the ruling, Smillie has been permanently banned from participating in British Columbia’s investment market, except as an investor under the supervision of a registered adviser. His company, ezBtc, which was dissolved in 2022, is similarly barred from trading shares or engaging in promotions.
While the BCSC intends to use any recovered funds to compensate victims, the status of Smillie’s personal finances and remaining company assets is unclear. The panel acknowledged, “We have no information about his personal circumstances or his ability to pay the sanctions.”
Smillie did not attend the hearings, though he was represented by legal counsel during the proceedings.
This case underscores the critical importance of regulatory oversight in the cryptocurrency market and serves as a cautionary tale for investors.
