The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas’ first-ever crowdfunding platform is alleging that the “mislabeling” of its accounts by a BISX-listed bank created the “prejudicial impression” that it was commingling investor/client funds with its own.

Documents filed by ArawakX, in its bid to fend-off the Securities Commission’s attempt to have the Supreme Court order its winding-up, allege that Bank of the Bahamas incorrectly described payments into its fiduciary accounts as ‘payroll’ rather than ‘credits’.

Fiduciary accounts are typically used by multiple forms of financial services providers, including attorneys, to fold funds and assets that belong to clients and keep them separate from those of the company. ArawakX, in documents filed last week, alleged that by labelling these transactions as ‘payroll’ Bank of The Bahamas have the wrong, misleading impression that it was using client monies to meet staff salary costs - something it has vehemently denied doing.

And, of the nine transactions cited, ArawakX alleged that eight purportedly occurred after Bank of The Bahamas froze all its accounts on November 1, 2022, amid confusion as to whether it was the crowd-funding platform’s two principals, D’Arcy Rahming senior and his son, or their largest investor, James Campbell, who had authority and control over them.

Mr Rahming senior, in an April 5, 2023, letter to Christina Rolle, the Securities Commission’s executive director, responding to the regulator’s investigation that was triggered by a combination of the account freezing and Mr Campbell’s complaints, said the probe “did not arise in a vacuum” and drew her attention to what the crowd-fund platform had allegedly discovered after launching Supreme Court litigation against Bank of The Bahamas.

“During our audit, inspection and discovery in our Supreme Court action against Bank of The Bahamas, we discovered what appears to be [incorrectly] labelled transaction,” he alleged. “Which transactions were ‘credits’ to ArawakX’s accounts mislabelled as ‘payroll’, creating the false and prejudicial impression that ArawakX was meeting its payroll with, or otherwise commingling, client assets.

“We believe this was communicated to the Commission in order to bolster a false narrative to the detriment of ArawakX.” Mr Rahming senior asserted that this was “deployed to weaponise the Commission against ArawakX to artificially drive the false narrative that ArawakX was insolvent, and argued that the regulatory restrictions imposed on the platform, which prevented it from conducting further equity crowd-fund raises on behalf of companies, had “curtailed” its business.

“While ArawakX continues to be solvent, we cannot deny the adverse impact the forced inactivity of the past five months, since November 1, 2022, has done,” Mr Rahming senior added. “Additionally, the actions of Bank of The Bahamas have continued to stymie our efforts to service Nassau Gas and Tanks, whose funds remain tied up in that dispute.”

Nassau Gas and Tanks was the last equity crowd-fund that ArawakX facilitated before it was consumed by its regulatory woes. It was only able to pass the funds raised from investors to the company in mid-May 2023, some five months after the offer closed, following Justice Simone Fitzcharles’ order that the accounts held by Bank of The Bahamas be unfrozen.

Mr Rahming senior told Tribune Business that ArawakX is presently in talks with Bank of The Bahamas to settle the litigation it launched against the BISX-listed lender on December 5, 2022. “Yes, we are,” he confirmed. “The case with them is coming up in late October; October 22, I think, is when it goes back to court.

“We have the initial injunction where we had always proven the monies held up in the fiduciary accounts belonged to the actual issuers, and as soon as those accounts were released we gave those issuers their funds to ensure they were able to conduct their operations.”

ArawakX, in responding to “suspicious transactions” that purportedly showed its was commingling client funds with its own, and using them to finance payroll, wrote to the Securities Commission: “Notice the dates of these transactions all occurred after the accounts were frozen and access thereto denied to ArawakX.

“One transaction occurred after Bank of The Bahamas’ October 21 partial freeze, and eight transactions occurred after Bank of The Bahamas’ October 31 full freeze. Yet these credits were presented as the proverbial ‘smoking gun’ of their assault against our company.

“Use of the term ‘payroll’ knowingly implied that this was a debit to the fiduciary account (money removed to pay staff). However, the nine transactions in question are all credits (incoming). These are bank-generated transactions.” However, Bank of The Bahamas purportedly said “it is difficult to conclude that the account balance is that of clients alone”, thus alleging ArawakX was commingling funds.

In its statement of claim against Bank of The Bahamas, the crowd-funding platform and its parent, MDollaz, said it first learned of a problem when Tianna Gomez, a client relationship officer, informed ArawakX’s vice-president of clearing, Ken Donathan, on October 24, 2022, that it was unable to process a $48,900 payment to Foot and Ankle International.

This represented a payment of investor monies to Dr Daniel Johnson’s business, Footcare RX, which had been raised from a crowd-funding issue via ArawakX. The latter alleged that it was then informed by Yvette Johnson, Bank of The Bahamas’ manager of premier and private banking, that its accounts were frozen following a meeting with Mr Campbell.

“The bank was visited yesterday (October 20, 2022) by Mr James Campbell, who provided an amendment to the Memorandum and Articles of Association which introduced new articles specific to overriding provisions for the captioned company,” Ms Johnson allegedly wrote. “In light of the above, effective immediately all accounts have been placed on hold and actively ceased as a result of the untenable position the bank is presented with.”

Other legal documents allege that a new Memorandum and Articles of Association for ArawakX were drawn up to facilitate Mr Campbell, as its largest investor, becoming a director with an option to convert his $1.3m into a 22 percent equity stake. However, the Rahmings have alleged these were never ratified, and they subsequently move to unwind them amid a battle for control of the crowd-funding platform with the former Colina Insurance Company president. 

ArawakX is now seeking damages from Bank of The Bahamas for breach of contract, injury to its credit and reputation and alleged “unlawful interference” with its business relationships, plus aggravated damages. No dollar figure, though, is specified in the statement of claim.