Crypto CEO Allegedly Wagers $9.5M of User Funds on Gambling Sites

The founder of the cryptocurrency exchange ezBtc, David Smillie, has been charged by the British Columbia Securities Commission (BCSC) with misappropriating CAD $13 million (about $9.48 million) of customer cash for online gaming. This is a huge step. This shocking discovery highlights the continued difficulties in policing the quickly developing bitcoin market.

Following an examination, the BCSC found that Smillie had taken personal use of customer funds meant for trading on his platform. The commission claims that Smillie misled his customers by disguising ezBtc as a reputable platform for trading cryptocurrency assets while covertly sending millions of dollars to internet casinos.

“The respondents perpetrated a fraudulent scheme relating to securities by lying to customers about a crypto asset trading platform the respondents claimed to operate and by diverting approximately $13 million in customer assets for their own purposes,” the BCSC stated in its official decision.

Gambling with Customer Funds

During the investigation, regulators found compelling evidence that Smillie funneled customer funds from the ezBtc exchange to gambling websites such as FortuneJack and CloudBet. The flow of Bitcoin from ezBtc accounts to these gambling platforms was a strong indication of Smillie’s misuse of customer assets.

“As more Bitcoin came into Smillie’s Exchange Accounts from ezBtc, more Bitcoin were sent from Smillie’s Exchange Accounts to the gambling sites. This is a strong indication that Smillie used funds from ezBtc to fund his accounts at those gambling sites,” the commission reported.

The BCSC further revealed that the gambling accounts receiving these funds were linked either to Smillie himself or an ezBtc employee. “The majority of ezBtc’s transfers to CloudBet were to CloudBet accounts belonging to Smillie or an ezBtc insider,” the report stated, with some of the funds also linked to accounts at major exchanges like Poloniex, Binance, and Kraken.

Smillie did not show up for the hearing in spite of the gravity of these accusations, and it is still unclear where he is at this time. The absence of this information has only intensified the case’s concerns and sparked debate on the openness and accountability of bitcoin exchanges.

The findings of the BCSC emphasize the dangers that investors in the unregulated cryptocurrency industry confront and the necessity of tighter regulation to shield customers from dishonest practices.