Hearing wraps on alleged Nanaimo crypto scam
The B.C. Securities Commission has wrapped up a disciplinary hearing into an alleged $13-million fraud perpetrated by a defunct Nanaimo-based cryptocurrency trading platform.
After four days of testimony, the commission ended proceedings Monday and directed legal counsel for the commission and the company, ezBtc, to provide statements about the evidence and the applicable law relating to whether the respondents violated securities law.
The securities commission has alleged ezBtc and its sole director David Smillie lied to its customers and diverted about $13 million in assets to gambling sites.
According to the commission, the company allowed customers to open accounts, deposit crypto assets like bitcoin and Ether into 13,000 ezBtc wallet addresses and buy and sell crypto assets.
Between 2016 and 2019, customers deposited over 2,300 bitcoin and over 600 Ether on the platform.
The company was operated by 1081627 B.C. Ltd., which was incorporated by Smillie.
According to the BCSC, Smillie did not appear at the hearing. His whereabouts are unknown.
Among the allegations levelled by the commission, it is believed ezBtc transferred incoming bitcoin and Ether to two online crypto gambling sites without customer authorization, and lied to customers about their assets and where they were being held.
While the firm claimed it stored “over 99 per cent” of their bitcoin and other assets in “cold storage” or offline, the commission alleges it didn’t retain custody of customers’ assets, and most of the holdings that were displayed didn’t exist.
The BCSC notes that between 2016 and 2019, the platform’s daily balance didn’t exceed 11 bitcoin and 20 Ether, which meant many customers weren’t able to withdraw the crypto assets they believed were held there.
Lawyers can make submissions until May 17. The commission executive director’s submission is due April 26, while the respondent submissions are due May 10 and any reply submissions are due May 17.
Either party can request oral submissions.
The commission’s guideline for issuing rulings is to do so 120 days from the last day of submissions. If there is a finding of liability, there will be another round of submissions on sanctions.