Slowing motor and electric smoke coming from Magic Bullet blender?
It's basically dead. The insulative enamel surrounding the wires in the motor has become overheated. That is where the smoke is coming from. If you continue to use the unit the enamel will degrade completely resulting in an electrical short. It is actually a bit of a fire hazard, so I would suggest discontinuing use of the unit.

It is possible that the unit is defective. Given its age I'm sure its covered under warranty. Early failure of electric motors can also be from excessive load. It may be that your unit is not intended to process something so substantial as ice. Another thing to note is that if the unit is jammed and cannot spin, you should release the power immediately. This is the fastest way to burn out any electrical motor. That goes for a cordless drill and the like.