The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An Abaco-based broker is alleging it was defrauded out of obtaining an up to $9m equity ownership stake in a technology outfit providing services to the global digital assets industry.

Elco Securities, whose address is Loyalist Plaza on Don Mackay Boulevard in Marsh Harbour, is seeking damages and costs from a Nevada-domiciled entity that it accuses of failing to repay a $68,000 loan it received almost six years ago together with interest.

The Bahamian financial services provider, in legal documents filed with the southern New York federal court on Wednesday, also alleges that it exercised its rights to convert $20,000 of the loan into an equity stake in Dear Cashmere Holdings. Based on the $0.0125 conversion rate, Elco Securities is asserting this translates into a $8m-$9m equity in the borrower, but clams this, too, has not been honoured.

It is thus seeking a declaration that it remains "the beneficial and legal owner" of its original $68,000 loan to Dear Cashmere, which has its headquarters in New York, and has since reformed itself from a cashmere clothing merchant into a technology company called 'Swifty Global' that provides technology services to the blockchain and crypto currency sectors.

E. Isaac Collie, Elco Securities' managing director, declined to comment on the lawsuit in an e-mailed reply to Tribune Business inquiries last night. "It is too early to comment on this action. Please let's allow the defendant time to react," he said.

Alleging that Dear Cashmere and its successor entity are guilty of "the unlawful taking of its property", Elco Securities alleged in its New York legal filings: "On September 4, 2017, Elco provided the principal sum of $68,000 to Cashmere in exchange for a promissory note which Cashmere failed to repay on the maturity date, September 20, 2019.

"As a result, Cashmere made forbearances to Elco, which included the right to convert the debt obligation under the promissory note to shares of Cashmere. Cashmere not only failed to make any conversion of debt to stock, but it also first reduced and then eliminated entirely Cashmere's debt obligation to Elco, as reflected in Cashmere's disclosure statements. Cashmere took this action without the authority or legal basis to do so."

The initial $68,000 loan was due for repayment just weeks after Abaco was devastated by Category Five storm, Hurricane Dorian, and Elco admitted that its copy of the promissory note was destroyed in the storm's winds, flooding and storm surge.

It alleged, though, that Dear Cashmere was unable to repay either the $68,000 loan principal or $17,299 interest when the loan matured. The borrower agreed to accrue these two sums, and the Bahamian broker was also "given the right to convert the debt to shares of Cashmere at a conversion rate of $0.0125".

However, in 2021, Dear Cashmere was acquired by two businessmen, Nicolas Link and James Gibbons, and transformed from a cashmere clothing merchant into a technology company. Elco Securities, in the meantime, made numerous requests for payment "to no avail" and, on June 7, 2021, its US attorneys sent a letter demanding repayment of the $85,299 in combined principal and interest, as well as $7,500 in legal fees, for a total $92,799.

A second letter was sent three weeks' later, noting that Dear Cashmere's own corporate disclosure statements acknowledged the debt was due and owing, but no reply was ever received. However, the borrower's next disclosure statement, dated end-June 2021, showed that the principal due to Elco Securities had reduced from $68,000 to $40,000 even though the Bahamian broker/dealer had not been repaid a single cent.

Dear Cashmere asserted that Elco Securities had "partially sold its interest" in the promissory note to an entity called Platinum Properties, but allegedly struggled to provide any evidence to back up its claims. Finally, in March 2022, it provided documents showing wire transfer payments but the Bahamian broker alleged that none of the recipients were itself or any elated entities.

In the meantime, Elco Securities alleged: "On or about October 18, 2021, Elco sent an e-mail instructing Cashmere to recognise the principal sum of $68,000 owed to Elco and, from that amount, to convert $20,000 to shares of Cashmere at a conversion rate of $0.0125. As of October 18, 2021, the conversion of $20,000 would have resulted in Elco receiving approximately $8m-$9m. Elco received no response to its instructions."

Documents attached to the legal filings show that request came from Mr Collie himself. However, Dear Cashmere later filed another corporate disclosure statement showing the Bahamian broker's investment interest had fallen from $40,000 to zero and thus been eliminated.

It is unclear why it took Elco Securities almost two years to subsequently file its legal action, but it is alleging it has suffered damages "in the millions of dollars" due to Dear Cashmere and its successor entity's breaches of contract, fiduciary duty, negligence, fraud, negligence and lack of good faith dealing.

Elco Securities appears to be part of the larger Elco Group, according to the latter's website. It is described as providing a trading platform for retail and institutional clients to trade equities, fixed income securities, commodities, currencies and metals worldwide.

Other group entities are Elco Global Wealth Management; Elco Marine Services; which offers registration, flagging and related services to the maritime industry; Elco Capital; and Elco Corporate Services, which is involved in company formation, management and trust services.