“MORE THAN SUFFICIENT EVIDENCE” to shutter ArawakX, Securities Commission says

“MORE THAN SUFFICIENT EVIDENCE” to shutter ArawakX, Securities Commission says

NASSAU, BAHAMAS — The Securities Commission is asserting that there is “more than sufficient evidence” to justify the winding-up of the country’s first crowdfunding platform ArawakX, citing its concerns over the company’s solvency as well as alleged governance irregularities and regulatory breaches.

In a statement Monday evening, the regulator noted that on Friday September 15th, it petitioned the court for the wind up of MDollaz Ltd trading as ArawakX, with the court hearing the matter inter partes and adjourning the case to October 13. Chief Justice Sir Ian Winder granted an interim order to preserve the status quo regarding suspending their operations, pending a hearing of the matter. 

Last week, D’Arcy Rahming Sr, ArawakX’s Chairman and CEO made his company’s challenges public through a letter addressed to stakeholders and the media.

He asserted that the company’s reputation has taken a “huge hit” and further claimed he has substantial evidence of a conspiracy to take control of the crowdfunding platform.

A call from Rahming for an investigation into the activities of the SCB relative to his company prompted the SCB to issue its own statement; the regulator revealed that it was investigating ArawakX amid solvency concerns and had suspended its registration at the end of August.

According to the September 18 affidavit of Securities Commission, executive director Christina Rolle, James Campbell, Felix Stubbs, and Hillary Deveaux attended the Commission’s offices in October 2022 and informed the regulator about issues with the company, specifically its corporate structure.

Deveaux, who himself was a former SCB executive director, resigned from the company’s board in December 2022. Campbell, a former Colina Insurance Company president, indicated that he had invested $1.2 million in the company and expressed deep concerns about its direction and operations.

According to Rolle’s affidavit, Campbell informed the Commission that since operations began, the company had been facing financial difficulties, with approximately $1.5 million of investor funds being spent.

He also informed the Commission that only one of the six fund offerings listed had met its minimum requirements, and staff had not been paid for months.

The company had also terminated Michael Turnquest, the CFO, with Rahming claiming to the regulator that it was due to gross insubordination and a lack of understanding of new technology. Turnquest, however, told the Commission that Rahming Sr. and Jr. had not allowed for the flow of information within the company, and he was not privy to certain financial information to carry out his duties.

According to Rolle’s affidavit, the regulator was deeply concerned about the precarious nature of MDollaz and James Campbell’s P/J’s Enterprise, a lender and alleged director and member of MDollaz.

A review of the unaudited financials from July 2022 revealed a negative working capital of $213,626.31, with current liabilities of $1,110,187 exceeding current assets of $896,561.02. The Commission also noted that an investor did not receive a refund of $26,004, as the funds were deposited into the operational account of MDollaz.

The Commission, according to Rolle, found that MDollaz had not maintained separate accounts and commingled its funds with those of clients or investors on its platform. Additionally, the Commission claimed that the company had not informed them of material changes in its corporate structure.

The Commission said it also discovered that the company had issued shares to various investors using unsubstantiated valuation methods and had raised additional capital without informing the Commission.

One investor, referred to as Investor 36, initially invested $15,000 in Wifi Bahamas, which failed. He then made an additional injection of $5,000, totaling $20,000, which was invested in Tropical Gyros. He ultimately invested $25,000 in the Pinnacle franchise, $50,000 in Nassau Gas, $50,000 in Footsore, $20,000 in Tropical Gyro, and $50,000 in MDollaz but has not received any returns from his investments.

Another investor, Investor 15, stated that he was approached by the principals, invested $75,000, and was told the company was valued at $200 million. His investment was in preference shares, which were later converted to ordinary shares.

The Commission’s analysis of bank account statements, according to Rolle revealed that, at all material times, the amounts due to subscribers were larger than the balances in their fiduciary accounts. There was strong evidence that the company used these funds to finance its operations and replaced them by soliciting investments in MDollaz.

Rolle stated that the Commission was satisfied that the company’s insolvency issues, governance irregularities, regulatory breaches, and possible criminal infractions had become insurmountable, resulting in ample evidence to justify winding up the company.