Sask. court orders trial in fraud case after $100K in stolen cash was traded for bitcoin

An advertisement of Bitcoin, one of the cryptocurrencies, is displayed on a building in Hong Kong, on Nov. 18, 2021. (AP Photo/Kin Cheung, File)

A case involving stolen funds from a Saskatchewan business being used to purchase cryptocurrency will be heading back to the courts, thanks to a new decision by Saskatchewan’s Court of Appeal.

The case revolves around an incident that took place in October of 2019.

Court documents outline that a man named Denzel Blackett fraudulently withdrew $110,672.97 from 4 Star Ventures’ account held at Innovation Credit Union (ICU).

According to its website, 4 Star Ventures operates as a power tong and pressure testing company based out of Gull Lake, Sask.

The vast majority of the funds, $103,932.50, were used to purchase Bitcoin. Blackett was arrested and charged by Durham Ontario Regional Police in March of 2020 for his actions in the fraud.

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The appeal does not include Blackett, but rather focuses on 4 Star Ventures’ efforts to regain the funds from Secure Digital Markets (SDM), the business that sold Blackett the 9.6823 Bitcoins with the stolen funds.

The original matter was heard in Saskatchewan’s Court of King’s Bench in Swift Current in June of 2023 – where the court granted summary judgement in favour of SDM. The company was entitled to keep the funds held in court and was entitled to any accumulated interest.

A striking application against SDM by ICU was dismissed by the court, in addition to the cross claims brought by both SDM and ICU.

The appeal was heard on Dec. 6, 2023.

In a written decision published on Aug. 28, Justices Caldwell, Schwann and Barrington-Foote concluded that the chambers judge erred when they ruled that SDM was entitled to keep the money as "a bona fide purchaser for value without notice."

The chamber judge's decision found that SDM had acquired the funds in the ordinary course of its business selling cryptocurrency.

“I conclude that the Chambers judge erred in law by rejecting and overlooking evidence relevant to the issue of when SDM learned that the funds it received from Mr. Blackett might have been obtained by him through fraud,” the decision read.

The three justices identified numerous issues, including the chambers judge failing to consider aspects of one affidavit and striking another due to a late filing.

“For these reasons, I conclude that the Chambers judge failed to address the pivotal question of whether SDM might have had knowledge of the fraud before it transferred the bitcoins to Mr. Blackett,” the decision read.

“In my view, it was necessary for the Chambers judge to squarely tackle and dispel that possibility in order to reach the conclusion that the Appellant’s claim to the Funds had been defeated by SDM’s claim to them. That conclusion was essential to his finding that there was no genuine issue requiring a trial in this litigation.”

In their decision, the justices ruled that the decision to grant summary judgment would be set aside, claims and applications by other parties would be revived and it would remit all matters in the litigation to the Court of King’s Bench for determination at trial.

In addition to allowing the appeal, the justices ordered SDM to pay 4 Star Ventures $3,000.