Canadian crypto platform EzBtc fraudulently sent customers' funds to online casinos

EzBtc operated between 2016 and 2019, during which clients deposited over 2,300 Bitcoin and more than 600 Ether on the platform. The BCSC alleges that EzBtc transferred incoming Bitcoin and Ether to two online crypto gambling sites without customer authorization. The value of the fraudulently transferred assets was approximately $13 million as of July 1, 2019.

Adding to the allegations, EzBtc reportedly informed clients that 99% of their crypto assets on the platform were held in cold storage, an offline storage method meant to enhance security. However, the BCSC claims that the platform did not use cold storage, did not retain custody of customers' assets, and that most of the displayed holdings did not exist. From 2016 to 2019, the platform's daily balance reportedly did not exceed 11 Bitcoin and 20 Ether, which falls significantly short of what would be needed for a legitimate broker to adequately service investors.

The allegations against EzBtc could lead to serious legal consequences for the company, as the assets in question are classified as futures contracts regulated under Canada's Securities Act. This classification means that EzBtc could be held liable for committing securities fraud, regardless of the underlying asset.

The BCSC has yet to prove its allegations, but it has requested the parties involved to appear at its offices on June 27, 2023, if they wish to be heard before a hearing is scheduled. If found guilty, EzBtc may face fines, sanctions, and other penalties for its fraudulent activities.

The allegations against EzBtc highlight the risks associated with investing in cryptocurrencies, especially through unregulated platforms. Many customers were allegedly unable to withdraw the crypto assets they believed were held on the platform, potentially resulting in significant financial losses.

This case underscores the importance of regulatory oversight and due diligence when investing in cryptocurrencies. Investors should exercise caution when selecting a trading platform, ensuring that it is reputable, secure, and compliant with relevant regulations.

The EzBtc case serves as a reminder of the potential risks and challenges that the cryptocurrency industry faces, particularly concerning fraud and misappropriation of funds. As the investigation unfolds, it is crucial for investors and the broader crypto community to stay informed about the outcome and take necessary precautions to safeguard their investments. Regulatory bodies, like the BCSC, will continue to play a critical role in ensuring the safety and security of the crypto market, protecting investors from fraudulent practices.