A Canadian crypto exchange is in hot water after gambling away $9.5 million in Bitcoin and Ether, igniting a regulatory storm and leaving investors reeling.

Regulator Finds ezBtc Misused Client Funds

Canadian cryptocurrency trading platform ezBtc and its founder, David Smillie, bilked clients out of over $13.5 million (or $13.1 million USD) in bitcoin investments and used the money for gambling.

Canadian provincial regulator, the British Columbia Securities Commission (BCSC), convened a panel that determined ezBtc stole client money "for their own purposes."

Before its permanent shutdown in September 2019 and subsequent dissolution in 2022, the ezBtc platform boasted that it kept all of its users' cryptocurrency assets in cold storage.

From 2016 to 2019, ezBtc collected 2,300 Bitcoin and 600 Ether from cryptocurrency investors.

ezBtc Diverts $9.5M in Bitcoin and Ether to Gambling Accounts

Nearly a third of the users' cash was diverted by Smillie for personal and gambling purposes, according to the BCSC panel:

“We find that in aggregate, 935.46 Bitcoin and 159 Ether were transferred by ezBtc to Smillie’s exchange accounts and/or to CloudBet and FortuneJack. The transfers to the two gambling websites were sometimes direct from ezBtc, and sometimes indirect from ezBtc to Smillie’s exchange accounts and then to the gambling websites.”

Cointelegraph shares that the panel went on to say that clients suffered "actual loss" since they were unable to withdraw their money due to the "deceit" engineered by Smillie and ezBtc.

Penalties Expected for ezBtc by September 24

A variety of punishments, including financial penalties and prohibitions on market participation, are expected to be implemented by September 24th, as stated in the court document.

Although neither Smillie nor an ezBtc official was present at the hearing, the founder's attorney was.

Only 3% of Canadians use Bitcoin or another cryptocurrency for their daily purchases, and this number hasn't changed much in over two years. Cash and credit cards are clearly the preferred methods of payment among Canadians.

The majority of Canadians who took the survey favored e-transfer, a way to send money by email or phone, above other options, including cash and cards.

The overall unwillingness to go cashless is the main cause of the sluggish adoption of cryptocurrencies in Canada.