B.C. crypto fraudster fined $18.4 million for gambling away clients’ cash
Shawn Murfitt was shocked to discover that David Smillie, the man behind the now-defunct cryptocurrency exchange ezBtc, had been fined a staggering $18.4 million by B.C.’s securities regulator for defrauding customers. Murfitt, who lives in Ottawa, had spent three years and a significant amount of money trying to recover his losses from Smillie, only to receive a default order from a B.C. small claims court for $31,524.39.
In a recent decision, the B.C. Securities Commission (BCSC) ordered Smillie and his company ezBtc to pay the hefty fine, which includes a $10.4 million order against customer losses and an $8 million administrative penalty. The BCSC found that Smillie had misled customers by claiming their cryptocurrency was stored in “cold storage” when it was actually being diverted to gambling websites and personal accounts within minutes.
Customers who deposited cash or cryptocurrency into ezBtc accounts believed their assets were safe and earning a nine percent annual commission. However, they soon discovered that they were unable to withdraw their funds as promised. The BCSC’s investigation revealed that Smillie had diverted over 2,300 bitcoin and 600 ether for personal use, including transfers to online gambling sites.
Despite Smillie’s claims that customer balances accurately reflected their assets, the BCSC determined that he had intentionally lied about the storage of cryptocurrency on the ezBtc platform. Smillie’s lawyer attempted to postpone the proceedings, citing illness and financial difficulties, but the BCSC found no evidence to support these claims.
The decision to fine Smillie $18.4 million highlights the volatile nature of cryptocurrency values. The missing bitcoin and ether were valued at $13 million in July 2019, but had skyrocketed to $94 million by April 2024. This significant increase in value only added to the frustration of investors like Murfitt, who had deposited funds when bitcoin was worth significantly less.
Murfitt’s small claims court lawsuit detailed his $30,000 deposit with ezBtc in December 2017, when bitcoin was priced at $12,000. The current value of bitcoin, which has increased tenfold since then, represents a substantial loss for investors like him. The BCSC’s findings revealed that one investor experienced significant stress over his 484 bitcoin loss, particularly as the value of bitcoin continued to rise.
Overall, the BCSC’s decision to fine Smillie $18.4 million serves as a warning to those involved in the cryptocurrency market. Investors must remain vigilant and cautious when dealing with cryptocurrency exchanges to avoid falling victim to fraudulent schemes like the one orchestrated by David Smillie and ezBtc.
