Former B.C. resident fined $18.4 million for using clients' crypto funds to gamble

financialpost.com:

A former B.C. resident has been fined $18.4 million for diverting millions of customer deposits for his cryptocurrency trading platform to gambling.

The B.C. Securities Commission found David Smillie and his company, 1081627 B.C. Ltd., operating as ezBtc, committed fraud by diverting nearly $13 million in customer assets to gamble.

The fines against Smillie and the company was $10.4 million, the amount diverted, minus repayments already made to customers. Smillie was also ordered to pay an $8 million administrative penalty for misconduct.

In a decision earlier this year, a commission panel wrote that Smillie and ezBtc “fraudulently diverted their customers’ crypto assets for their own purposes. Their deceit was blatant and repeated.”

Whatever money is collected will be made available to victims, though the securities commission said the status of Smillie’s finances and what’s left of the company’s assets is not known.

The company’s crypto trading platform allowed customers to buy and sell various assets and told them their digital holdings would be held offline, a more secure method of keeping digital assets that protects them from cyber threats and unauthorized access.

“Approximately a third of all the crypto assets that customers deposited with ezBtc or acquired on the ezBtc platform between 2016 and 2019 were diverted to gambling sites or to Smillie’s personal accounts on other crypto trading platforms,” said the commission in a statement Monday.

In total, 935.46 bitcoin and 159 ether were wrongfully diverted by Smillie and ezBtc.

The panel said Smillie “blatantly and repeatedly lied to customers” and threatened those who complained publicly.

”In this case, the respondents’ misconduct eroded trust in the capital