How a Canadian Crypto Exchange’s Founder Gambled Away $9.5 Million of Users’ Bitcoin and Ether
- Canadian crypto exchange ezBtc misappropriated $9.5M.
- Most of the funds went towards the founder’s gambling.
- Exchange gave false promises to users.
Since its inception, crypto has promised a world where users have unparalleled security and control over their funds. The reality soon turned out to be different. Centralized exchanges, the most popular platforms for crypto trading, largely remain opaque and unregulated entities with full control over their users’ funds.
This has been revealed to be a major problem several times, with a recent case in Canada being one of the more shocking ones. In this case, one exchange founder allegedly stole $9.5 million of users’ funds and funneled it all into gambling.
Shocking Revelations in ezBtc Case
The latest case of fraud in crypto has some shocking details, as filing by the British Columbia Securities Commission (BCSC) shows. According to the agency, the founder of a Canadian crypto exchange, David Smillie, misappropriated approximately $9.5 million worth of Bitcoin and Ether from customers. The funds in question went to his personal gambling accounts.
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EzBtc had promised users that 99% of the funds were in cold storage, offline wallets that provide additional security. The website references cold storage, apparently trying to give investors a false sense of security.
![](https://img.bitgetimg.com/multiLang/image/social/9b347a571ccc3dc5b1d370126f71878d1723623303401.jpeg)
Lured by promises of security, users deposited over 2,300 bitcoins and over 600 ethers on the platform between 2016 and 2019. Out of these funds, Smillie allegedly misappropriated 935.46 Bitcoin and 159 Ether, transferring them to his accounts. He later transferred these funds to online gambling platforms.
Canadian Crypto Exchange ezBtc Users Lost Millions
Smillie was able to misappropriate user funds due to several factors. Most importantly, these lack regulatory oversight combined with users relinquishing custody over their funds. This reveals a critical issue with centralized crypto exchanges in general, and it’s why many users say, “Not your keys, not your crypto.”
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The ezBtc case resulted in major financial losses to the users of his exchange. After transferring the money to gambling sites, ezBtc could not repay its users. The exchange was dissolved in October 2022.
Following the allegations by the British Columbia Securities Commission (BCSC), the case against ezBtc and David Smillie has moved into the phase of considering sanctions. The BCSC is deliberating on the appropriate punitive measures, including fines and a ban on trading.
On the Flipside
- The ezBtc case has some similarities with the fall of FTX. While Sam Bankman-Fried’s operation was much more sophisticated, it still shared the same inherent risks with centralized exchanges.
- Decentralized exchanges can also be exploited, including by insiders. However, this requires more technical expertise.
Why This Matters
The ezBtc case is a shocking reminder of the dangers of trusting centralized entities in crypto. Cases like these remind users to take custody of their funds seriously.
Read more about the safest ways to store your crypto:
What Are Crypto Wallets? How to Store, Spend, and Save Crypto
Read more about a popular Telegram game sharing its take on VCs:
What’s Behind Hamster Kombat Bashing Venture Capitalists
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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