A recent scandal has rocked the Canadian cryptocurrency scene, involving the exchange ezBtc and its founder, David Smillie. The British Columbia Securities Commission (BCSC), a provincial regulator, has found that ezBtc misappropriated approximately 13 million Canadian dollars ($9.5 million) of customer funds.

Details of the Misappropriation

Between 2016 and 2019, ezBtc managed to gather over 2,300 Bitcoin and more than 600 Ether from investors. Instead of securely storing these funds, as the platform promised, it diverted a substantial portion for personal use and gambling. The BCSC panel noted that 935.46 Bitcoin and 159 Ether were transferred to Smillie’s exchange accounts and gambling websites, such as CloudBet and FortuneJack.

The deceit orchestrated by Smillie and ezBtc led to significant financial losses for customers who found themselves unable to withdraw their assets. The exchange had gone offline permanently around September 2019 and was officially dissolved in 2022, leaving many investors in the lurch.

Regulatory Response

The BCSC is set to impose sanctions on David Smillie by September 24. These could include financial penalties and bans from participating in the market. While Smillie did not attend the hearing in person, he was represented by a lawyer.

This incident underscores the sluggish pace of cryptocurrency adoption in Canada. Despite the initial buzz around digital currencies, only 3% of the population uses Bitcoin or other cryptocurrencies for everyday transactions. Most Canadians continue to favor traditional payment methods like cash and cards.

As the crypto industry evolves, incidents like the ezBtc scandal highlight the need for robust regulations and investor protections. For Canada, the challenge lies in balancing innovation with security, ensuring that digital assets can be a reliable part of the financial ecosystem.