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Highlights
- Massive Fine David Smillie faces an $18.4 million fine for defrauding customers through his now-defunct cryptocurrency exchange.
- Fraudulent Practices Smillie misled clients, claiming their assets were safely stored, while diverting funds to personal accounts and gambling sites.
- Investor Losses Customers faced significant losses, with the value of missing cryptocurrency escalating alongside Bitcoin’s market surge.
The British Columbia Securities Commission (BCSC) has imposed a hefty $18.4 million fine on David Smillie for defrauding customers of his cryptocurrency exchange, ezBtc. The decision follows an investigation that uncovered a series of deceptive actions by Smillie, who operated ezBtc from 2016 to 2019, promising customers safe storage of their digital assets. In reality, however, much of the cryptocurrency was diverted to Smillie’s personal accounts and gambling websites.
The fine is broken down into $10.4 million for customer losses and an additional $8 million administrative penalty. The BCSC found that Smillie misled investors by assuring them their cryptocurrency was stored in “cold storage,” a method used to secure assets offline and protect them from hacking. Instead, Smillie transferred large sums of Bitcoin and Ether to online gambling sites such as CloudBet and FortuneJack, which advertise as crypto casinos.
Smillie’s actions began to unravel as customers reported difficulties in withdrawing their assets from their accounts on the exchange. The regulator found that from 2016 to 2019, more than 2,300 Bitcoin and over 600 Ether were deposited into the exchange, but by the time the platform went offline, users had no way of accessing their funds. A financial analysis revealed that 935.46 Bitcoin and 159 Ether had been diverted for Smillie’s personal use.
In an attempt to avoid accountability, Smillie’s legal team sought a delay in the hearings, citing his purported illness and lack of funds to mount a defense. However, the BCSC found no substantial evidence to support his claims and proceeded with the penalty.
For investors like Shawn Murfitt, the ruling offers little solace. Murfitt, who had invested significant funds in ezBtc, managed to win a small claims case against Smillie but has yet to recover any of his losses. His efforts highlight the difficulty of holding fraudsters accountable, especially when their fraudulent activities result in significant financial and emotional distress.
The BCSC’s ruling is further compounded by the astronomical rise in the value of Bitcoin over the past few years. In 2017, one Bitcoin was worth roughly $12,000, but today, its value has surged to over $133,000. This sharp increase in Bitcoin’s price has intensified the frustration of investors who had deposited their digital assets with Smillie, as they now face not only the loss of their original funds but also the missed opportunity to benefit from Bitcoin’s remarkable appreciation.
As the cryptocurrency market continues to evolve, the case of David Smillie serves as a stark reminder of the risks associated with unregulated platforms and the potential for fraud in the digital asset space. The BCSC’s ruling, while significant, does little to address the long-term impact on those affected by the scandal, and it highlights the challenges of securing justice in an increasingly volatile market.
