Fraudster fined over using clients’ assets for gambling at crypto casinos
The founder of a crypto platform has been convicted of fraud and ordered to pay a huge fine after he was found to have used the assets of clients for online gambling at crypto casinos.
David Smillie was behind the ezBtc platform, which was set up in British Columbia in 2016 but went offline in mysterious circumstances after just three years of operation.
A B.C. Securities Commission panel has now ruled that Smillie used millions of dollars worth of funds from the platform’s clients for gambling and other purposes.
The panel of three commissioners ruled that Smillie must pay a combined $10.4 million in fines, as well as an administrative penalty of $8 million.
The total demand for $18.4 million makes Smillie one of the biggest crypto fraudsters in history, with client funds having been misappropriated at crypto casino sites.
In their ruling, the B.C. Securities Commission panel said Smillie – who denied the accusations of fraud – had “blatantly and repeatedly lied to customers”.
But despite telling him to pay $18.4 million, the panel conceded it has “no evidence of Smillie’s personal circumstances or his ability to pay”.
Funds that had been transferred from ezBtc’s Bitcoin and Ethereum addresses were tracked by Integra FEC, a forensic data analytics firm hired by the commission.
Smillie, who did not attend the hearings, had pushed for them to be delayed on health grounds, as well as claiming he was having difficulties accessing the relevant records to make his case.
Investigations into the operations of the ezBtc platform found that about a third of the crypto assets that had been either deposited with the exchange or acquired through it had been sent to Smillie’s personal accounts on alternative exchanges, or used at crypto casino sites.
It was revealed that a total of 935.46 bitcoin had been defrauded in the crypto casino scam.
Clients were informed that their crypto assets should have been held in “cold storage” and therefore not available to be used for any other purpose, keeping it safe from cyber attacks.
One of the scam’s victims, Shawn Murfitt told CBC Monday he has spent three years trying to recover the funds defrauded from him. He won a default order from a B.C. small claims court for $31,524.39, having deposited $30,000 with ezBtc in December 2017.
At that time, one bitcoin was worth about $12,000 and the value of the high-profile cryptocurrency recently hit a new record high, passing $100,000 for the first time.
