A now-defunct cryptocurrency platform formerly based in Nanaimo has been ordered to pay $18.4 million in financial sanctions for defrauding its users.
Cryptocurrency is a digital form of money that doesn't rely on a central authority, such as a bank or government like the Canadian dollar does. The system operates on blockchain technology to record transactions.
A B.C. Securities Commission panel imposed the sanctions Friday, Nov. 27. The commission explained in a press release that clients of EzBtc, which existed from 2016 to 2022, were told "their digital holdings would be held offline, a more secure method of keeping digital assets to protect them from cyber threats and unauthorized access."
Instead, one-third of all the crypto assets deposited or acquired on the site between 2016 and 2019 were diverted to gambling sites or to the personal accounts of the owner, David Smillie, on other platforms. Almost $13 million was diverted to gambling.
In earlier hearings, one customer testified that he had planned to use the funds to pay for medical procedures in his family and had to carry debt for a longer time to pay for them.
"He was the centre of discussions or jokes among family and friends and had his intelligence questioned because he was defrauded," the panel noted.
In the recent decision on the nature of the sanctions, the securities commission panel wrote that the company and its founder "fraudulently diverted their customers’ crypto assets for their own purposes. Their deceit was blatant and repeated.”
A total of $10.4 million in sanctions was ordered against Smillie and his company, which can be made available to its victims. The company founder has also been ordered to pay an administrative penalty of $8 million. The panel noted in its decision that it has no information about Smillie's personal circumstances or his ability to pay the sanctions.
