The man behind a fraudulent cryptocurrency platform that diverted nearly $13 million worth of users’ funds to gambling websites and personal accounts has lost his bid to appeal a B.C. regulator’s sanctions against him.
Last year, the B.C. Securities Commission ordered David Smillie and his company, 1081627 B.C. Ltd., which operated as ezBtc, to repay a combined $10.4 million that the regulator determined they had obtained through fraud. The commission also ordered Smillie, as the company’s director, to pay an $8 million administrative penalty.
Smillie sought leave from B.C.’s highest court to appeal the BCSC’s decisions finding him liable for the fraud and imposing sanctions on him.
In a decision issued earlier this month and published online Thursday, the B.C. Court of Appeal declined to hear Smillie’s case.
Justice Nitya Iyer concluded that Smillie had not presented any grounds for appeal that met the “low” threshold required under the provincial Securities Act.
“Mr. Smillie asserts 14 separate errors of law as grounds of appeal,” Iyer’s decision reads.
“The errors listed are repetitive and disorganized. It is clear that Mr. Smillie takes issue with nearly all of the (BCSC) panel’s findings, including jurisdiction, fraud, procedural fairness and all of the sanctions.”
Despite this, his submissions failed to “identify why the asserted errors are properly characterized as errors of law,” according to the decision, which notes that “bald assertions of errors” are insufficient to justify a review by B.C.’s highest court.
During the hearing on his application Smillie “abandoned” several of his arguments, eventually limiting his case only to a dispute of the valuation of the fraud victims’ losses at $10.4 million.
According to Iyer’s decision, the BCSC panel valued ezBtc users’ losses based on the value of their assets as of April 30, 2018, a date chosen because it was “the midpoint of the period during which Mr. Smillie and ezBtc misappropriated crypto assets.”
Smillie had argued before the panel that the amount should be calculated based on the value of each asset at the time it was diverted, but the regulator found that suggestion a “near impossibility.”
Before the appeal court, Smillie argued that the BCSC panel’s valuation method was arbitrary, but acknowledged that the regulator was only legally required to prove that the valuation it arrived at was a “reasonable approximation” of the users’ losses.
Smillie was unable to provide any evidence showing that the valuation was unreasonable or arrived at in error.
“As commission counsel noted, it appears the panel’s approach was actually more favourable to Mr. Smillie than the alternatives he suggested at the application hearing,” the decision reads.
“As the applicant, Mr. Smillie bears the burden of showing his appeal has prima facie merit. While this is a low bar, Mr. Smillie has not met it. I conclude, considering all of the factors, that it is not in the interests of justice for a division to hear this appeal."
In addition to owing a combined $18.4 million to the BCSC, Smillie and his company are permanently banned from participating in B.C.’s investment market, with a small exception allowing Smillie to invest in personal accounts through a registered advisor.
Smillie previously worked as a video editor for CTV News between 2001 and 2010.
