Canada’s securities regulator has charged the head of a crypto exchange with gambling users’ crypto.
The founder of crypto exchange ezBtc, David Smillie, used C$13 million ($9.48 million) in client funds to gamble online, according to a new ruling from the British Columbia Securities Commission (BCSC).
The defendants carried out a securities fraud scheme by lying to clients about the cryptocurrency trading platform the defendants claimed to operate and by diverting approximately $13 million in client funds for their own purposes.
The commission’s investigation found “compelling” indications that Smillie gambled with clients’ money, moving their money from the exchange to betting sites FortuneJack and CloudBet.
As more bitcoin was deposited into Smillie’s exchange accounts from ezBtc, more bitcoin was sent from Smillie’s exchange accounts to the gaming sites. This is strong evidence that Smillie was using funds from ezBtc to fund his accounts on these gaming sites.
The regulator alleges that the gaming accounts to which the crypto funds were connected belonged to either an ezBtc employee or Smillie himself.
The majority of ezBtc transfers to CloudBet were to CloudBet accounts belonging to Smillie or an ezBtc insider. More than 21.3% of ezBtc to CloudBet bitcoin transfers were made to CloudBet deposit addresses that also received bitcoin from Smillie’s Poloniex, Binance, and Kraken accounts.
Smillie was not present at the hearing in person and his whereabouts are currently unknown.
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