Executive Summary: Key Legal and Evidentiary Issues

• Trustee obtained a default judgment declaring a $212,000 cryptocurrency transfer void as a transfer at undervalue under the Bankruptcy and Insolvency Act.

• Dziedzic brought a motion to set aside the judgment, claiming lack of proper notice due to failure to serve his lawyers.

• The court found Dziedzic had been properly served multiple times and deliberately evaded service.

• Misuse of investor funds and inconsistency in affidavits undermined Dziedzic’s credibility and procedural fairness arguments.

• The motion failed to meet the threshold under Rule 38.11 for setting aside a judgment granted in his absence.

• The court dismissed the motion and reserved on costs, citing Dziedzic’s delay and avoidance tactics.

Facts and outcome

Banknote Capital Inc., a financial services company based in Ontario, was adjudged bankrupt in November 2023 following allegations that it was used to operate an investment-based Ponzi scheme. Michael Dziedzic, one of Banknote’s principals, became the subject of scrutiny for a $212,329.35 transfer made shortly before the bankruptcy. This money was wired to a Dubai-based cryptocurrency company, Futura Best Investment LLC, in exchange for tokens allocated to Dziedzic’s wallet.

The court-appointed trustee in bankruptcy, BDO Canada Limited, brought a motion under section 96(1)(b)(i) of the Bankruptcy and Insolvency Act to void the transaction as a transfer at undervalue made within one year of the bankruptcy. Justice Perfetto granted the motion on June 18, 2024, on an unopposed basis and awarded costs of $14,500 to the trustee.

Dziedzic later brought a motion to set aside that judgment under Rule 38.11 of the Rules of Civil Procedure, claiming he had not received proper notice of the motion and was therefore unable to defend it. He argued that the trustee had failed to notify his counsel at McKenzie Lake Lawyers LLP, who were known to be representing him in related class proceedings. Dziedzic also alleged that he had made the investment to recover funds for defrauded investors, not for personal gain.

Justice Nicholson rejected Dziedzic’s explanation. The court reviewed extensive evidence of multiple service attempts via email, regular mail, and personal service at two confirmed residential addresses. Process servers also engaged in repeated efforts to contact him directly, and notices were ultimately posted to his door and delivered to household members. The court concluded that Dziedzic had received the documents and deliberately ignored them.

In addition, the court found that Dziedzic’s affidavits were inconsistent and misleading. He claimed to have received certain legal documents before they had actually been sent, weakening his credibility. The judge emphasized that the purpose of Rule 38.11 is to remedy cases of genuine mistake or lack of notice—not willful avoidance. The court noted that Dziedzic failed to act “forthwith” once he became aware of the judgment, further undermining his motion.

The motion was dismissed. Justice Nicholson found that the interests of justice did not justify granting relief in a case where the moving party had actively evaded the court’s process and failed to take reasonable steps to respond. Costs were reserved pending further written submissions. The decision reinforces the principle that litigants cannot ignore legal proceedings and expect judicial sympathy when the consequences arrive.