ezBTC found guilty of gambling away $9.5m worth of customer funds

ezBTC, a now-defunct cryptocurrency exchange, has been found guilty by a BC Securities Commission (BCSC) panel of spending $9.5m of customer funds on gambling. This amounts to approximately one-third of all crypto funds that have been deposited with ezBTC, which was itself incorporated in British Columbia, Canada.

ezBTC case gets sorted out during a BC Securities Commission panel

According to the investigation launched by the regulator, between 2016 and 2019, ezBTC would divert funds to various gambling sites, at the behest of its founder, David Smillie.

Smillie is found guilty of having misused customer funds to fuel his gambling habits. Smillie is personally to blame here, the BCSC panel has assessed, as the crypto exchange transferred a total of 935.46 bitcoins and 159 ethers to his gambling accounts at two gambling websites.

The two have been named in the probe as CloudBet and FortuneJack, according to Decrypt and Binance, a rival exchange, which covered the news and cited the two gaming platforms as the places where Smillie held his accounts.

Both are well-established, trusted, and respected gambling sites in the country. Customers who inquired about cryptocurrency transfers were told that the exchange was simply moving the assets into cold storage, a more secure form of protecting digital assets by disconnecting them from the Internet.

A total of 2,300 bitcoins and 600 ethers were put in cold storage by ezBTC but a significant number was siphoned off to fuel Smillie’s gambling habit, the panel found out.

The panel discovered that "customers were unable to recover all of their assets," and that the deceit had led to actual loss for them. The panel also found out that Smillie was aware that ezBTC was not keeping custody of the player's assets.

Crypto founder succumbs to gambling temptation

The investigators further chastised Smillie for failing to recognize that diverting customer funds would most likely result in financial losses for ezBTC customers.

"By authorizing, permitting or acquiescing in ezBtc’s misconduct, Smillie committed the same misconduct as the platform," the panel’s official statement read.

Despite the series of allegations levelled against Smillie, the case is not a criminal proceeding, meaning that Smillie, who has been represented in the matter through a lawyer, is unlikely to face jail time.

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