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Science + Tech

BC Securities Commission Launches First Public Probe into Bitcoin Exchange

EXCLUSIVE: Regulator tells Tyee it’s investigating Vancouver-spawned ezBtc, accused of owing millions.

Ethan Lou 4 Nov

Ethan Lou’s first book, Once a Bitcoin Miner, a memoir through scandal and turmoil in the cryptocurrency Wild West, will be published in 2020 by ECW Press.

The BC Securities Commission (BCSC) is investigating complaints about the Vancouver-spawned Bitcoin exchange ezBtc, whose users say they cannot access their cryptocurrency on the platform, the regulator said today in a statement to The Tyee.

The investigation was underway as early as September, sources close to the matter told The Tyee.

The move was unexpected for the a body whose mandate does not usually cover cryptocurrency exchanges. It’s the first time the commission has publicly said it is investigating an exchange. After The Tyee revealed in July that ezBtc had been accused of owing millions, the BCSC said in a statement that while an exchange may theoretically fall under its mandate, none did at that time.

David Smillie, the founder of ezBtc, could not immediately be reached for comment. His company email has been de-activated and his phone number is not in service. Smillie previously declined to comment beyond saying there have been “considerable misconceptions” about his company.

Vancouver has spawned the world’s first Bitcoin ATM, the country’s first registered cryptocurrency investment fund and numerous publicly traded blockchain companies.

But that oversized Bitcoin presence has also led to attention on problematic cryptocurrency exchanges, including the defunct QuadrigaCX, whose users now claim more than $200 million.

In July, The Tyee reviewed four lawsuits launched by ezBtc users and spoke with three other clients who say they attempted to make withdrawals last year, but did not receive the money. Altogether, their claims total more than $100,000. Two former business associates of Smillie, who say they lent him Bitcoins, are also suing him for more than $60 million.

While some users have won judgments against Smillie, online records show the courts have yet to rule on the larger claims from the former business associates.

Even users who won in court have said they have yet to see any money. Some have said they complained to police and the securities commission, but had seen no action.

The ezBtc website subsequently went offline. In October, the ezBtc Facebook page appeared to have been hacked. The unnamed person who now controls the page posted publicly about tracing the flow of cryptocurrency through the exchange, gathering information and encouraged users to contact authorities. The page posted that it has heard from 69 users.

In its statement, the B.C. regulator said, “BCSC’s policy is not to comment on the existence of an investigation, but has determined it is in the public interest to do so in this case.”

“Customer assets are at risk,” its statement said. “Anyone who invested through ezBtc should consider consulting a lawyer about their options for retrieving their money.”

The commission also said: “As of today, no crypto-asset trading platforms have been authorized to operate by the BCSC… [but one] could be subject to enforcement action for any violations of securities laws, if its activities fall within our oversight.”

That tone differs from that of the body’s statement in July, when it said its mandate “is limited” and that even though cryptocurrency exchanges “may be subject to securities regulation,” none “has been recognized as a marketplace.”  [Tyee]

Read more: Science + Tech

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