Terry Lee was the "toe captain" in the bar that night.
He says the customer swallowed his drink with the toe in it, put five hundred dollars on the table.
The toe is part of a famous Dawson City tradition which involves drinking a shot of whisky. The toe is usually dropped into the glass and the drinker must have the toe touch their lips.
The posted "fine" for swallowing the toe was $500.
Lee says he was told the man is an American who had been living in Dawson for the summer.
The man was said to have just picked up his rent deposit because he was leaving town.
Lee says it's not the first time the toe has been swallowed but he believes this is the first time it was deliberate.
The fine for swallowing the toe has now been raised to $2500.
Lee says the tradition will continue as the bar had a backup toe.
Over the years, more than eight toes have gone missing or been stolen or destroyed. A new replacement has been found every time.
It's estimated that more than 60,000 people have paid for the privilege of drinking a shot of Yukon Gold whiskey featuring this genuine human toe.
Lee says he and the hotel, which owned the last toe, are hoping another one will be donated.