Crypto platform ezBtc committed fraud, BC securities regulator says

[ad_1]

Canadian cryptocurrency trading platform ezBtc committed fraud by lying to customers and diverting their money to gambling websites, according to the BC securities regulator.

For about three years, ezBtc informed its customers across the country that their personal funds were stored securely. Customers thought they could buy and sell crypto assets such as bitcoin and ether on the platform. The holdings of thousands of digital wallets were displayed online, much like a bank, easy to deposit and withdraw.

But the British Columbia Securities Commission alleges that was all a lie. The crypto platform has not retained custody of its clients’ assets and most of the holdings shown by ezBtc never existed, the regulatory agency told The Globe and Mail ahead of the public release of its findings. this week.

The BCSC is now requiring ezBtc to come to its offices on June 27 if the company wishes to be heard before a hearing is scheduled. The regulator claims that ezBtc committed securities fraud because its agreements with its customers are futures contracts, which are considered securities. The allegations have not been proven in court.

As Canadian watchdogs crack down on crypto platforms after several high-profile meltdowns in the sector last year, BCSC Director of Enforcement Doug Muir says he has seen quite a few cases such as ezBtc. At the heart of it, many of these cases are just old-fashioned fraud dressed in a new wardrobe, Mr. Muir said in an interview.

EzBtc operated under a company number, 1081627 BC Ltd., registered in 2016 by David Smillie, the sole director of the company. It was first based in Vancouver, then in Nanaimo, British Columbia, a port city about 110 kilometers north of Victoria, where an office existed for the company until it abruptly ceased operations. .

In November 2019, customers first noticed that the ezBtc.ca website was no longer working. They could not perform any transactions or withdraw any assets they believed to be held on the platform in cold storage, which means safely offline under the apparent supervision of ezBtc.

Crypto Hype Is Down, But Crypto Fraud Proliferates

BC securities watchdog to impose penalties for less serious rule violations

Now, new findings from the BCSC have revealed that customers cannot withdraw their assets because the platform does not hold them in the first place.

Between 2016 and 2019, ezBtc reportedly opened around 13,000 digital wallets for its customers. More than 2,300 bitcoins and nearly 600 ether have been deposited in these wallets, the BCSC said. However, the platforms’ daily balance never exceeded 11 bitcoin and 20 ether, the regulator added.

Unbeknownst to customers, ezBtc transferred incoming bitcoin and ether to two crypto gambling websites, the regulator alleged, without naming the sites. Assets misappropriated in this way were worth nearly $13 million as of mid-2019, the BCSC said.

EzBtc did not respond to repeated requests for comment.

As of at least 2021, Mr Smillie’s whereabouts have been unknown, according to chat messages between dozens of former ezBtc customers on Discord, Reddit and other platforms. A phone number associated with ezBtc has been disconnected and email addresses linked to the company’s social media pages are bouncing around as if they never existed.

The price of bitcoin and other cryptocurrencies has rebounded this year after a major drop in 2022. The industry as a whole is still reeling from the implosions of its biggest players, FTX Trading Ltd. and Celsius Network LLC, though the antics that have become synonymous with crypto seem to be slowly making a comeback.

We were seeing so much hype around crypto and anything crypto-related, Muir said. But we know that investors don’t spend the time doing their due diligence or understanding how it all works. We urge everyone to start doing this if they are going to get involved in crypto.

[ad_2]