The Tribune

• Platform to battle ex-Colina chief on $1.3m ‘option’

• Won’t honour conversion after he ‘blew the whistle’

• Alleges he’s ‘not the right person to be shareholder’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas’ first-ever crowd-funding platform plans to bar its largest investor from taking a 22 percent equity stake in the business following the fall-out that triggered its present regulatory woes.

D’Arcy Rahming, ArawakX’s chairman and chief executive, told Tribune Business it is preparing for a legal battle with James Campbell, the former Colina Insurance Company president, after deciding it will not honour the $1.3m “option” that will allow the latter to convert his investment into an ownership interest in the platform.

Asked about the crowd-fund platform’s present relations with Mr Campbell, who sparked the events that have led to it facing a winding-up petition when he went to the Securities Commission as a ‘whistleblower’, Mr Rahming replied: “The situation is that he has a legitimate option to purchase 22 percent of the firm, and he has asked for one share to be recognised and that the rest be held.

“I don’t know what the correct term is, but it was for us to hold the rest of the shares until he is ready with them. Prior to this, our position was that James Campbell has a legitimate right and we are not challenging that at all. Now, we think he’s not the right person to be given those shares because of the actions he took. We intend to make it a civil matter. It’s not a regulatory matter. It’s a civil matter. We don’t think he’s the right person to be a shareholder.”

Mr Campbell could not be tracked down for comment before press time last night, but any legal battle between himself and ArawakX if and when he chooses to exercise that option could, of course, be rendered moot if the Securities Commission persuades the Supreme Court to order the crowd-funding platform’s winding-up at next week’s October 13 hearing.

Should the regulator succeed, and ArawakX be placed into provisional liquidation, Mr Campbell could potentially be among the biggest losers as equity investors typically reside at the bottom of the creditors’ queue. The former Colina chief had provided MDollaz, which traded as ArawakX, with nearly $1.6m in total financing.

This was broken down into the $1.3m “option” which, if exercised, would give him a 22 percent equity stake in the platform plus a further loan for $279,000. Based on the $1.9m raised from outside investors, as noted in ArawakX’s draft financial statements for the year to end-July 2022, Mr Campbell’s $1.3m option accounted for 68.4 percent - or more than two-thirds - of the new equity capital that the platform was hoping to obtain Securities Commission approval for.

Mr Rahming, in a September 27, 2023, affidavit responding to the Securities Commission’s petition, alleged that Mr Campbell had issued no demands that he be repaid the $1.3m. Meanwhile, ArawakX’s attorney, Khalil Parker KC, in a September 12, 2023, letter responding to the regulator’s decision to suspend his client’s licence for 15 days, denied that it increased its share capital to dilute Mr Campbell’s influence.

“For the avoidance of doubt, the increase of ArawakX’s share capital was a reasonable and necessary step to afford any third party the option to participate in ArawakX at the scale asserted by PJ Enterprises,” Mr Parker said of Mr Campbell’s company. “Therefore, the increase of ArawakX’s capital was intended to facilitate increased participation in ArawakX and would, in any event, have been a necessary first step to PJ Enterprises’ desire to participate in ArawakX.”

Christina Rolle, the Securities Commission’s executive director, in an August 30, 2023, letter to Mr Rahming had suggested the change in the crowd-funding platform’s capital structure from what was originally set out in its Memorandum and Articles of Association was designed to “diminish the potential authority” and influence of Mr Campbell and PJ Enterprises.

ArawakX’s initial capital was $5,000, divided into 5,000 shares with a par value of $1 each, but Ms Rolle said the Companies Registry revealed this was subsequently changed to $100,000 divided into 10m shares each with a par value of one cent. This change, she added, was done without the knowledge or approval of the Securities Commission.

“The Commission notes that the act of changing the capital structure appears to have been done to accomplish at least two things,” Ms Rolle wrote. “Firstly, the diminution of the potential authority or influence of lenders to the company and, of particular note, is the impact of the share structure in relation to the primary lender, PJ Enterprises.”

Having refuted this, Mr Parker then accused Mr Campbell of “setting out to gravely injure” ArawakX by both his complaints to the Securities Commission and his intervention with Bank of The Bahamas. The latter resulted in the crowd-funding platform’s operational and fiduciary accounts being blocked, or frozen, for just over six months between early November 2022 and mid-May 2023.

“ArawakX does not intend to issue any shares to Mr Campbell or his proxy in the circumstances,” Mr Parker added, backing Mr Rahming’s assertions to Tribune Business. “Mr Campbell has such rights as may be available to him at law, and ArawakX will defend any such litigation vigorously....

“It must be noted that ArawakX has received neither a claim nor a demand for funds from Mr Campbell to the date hereof. ArawakX’s relationship with Mr Campbell remains a private matter, which the Commission appears determined to conflate into a regulatory issue.”

Hillary Deveaux, one of Ms Rolle’s predecessors as Securities Commission executive director, was on Mdollaz/ArawakX’s Board but he resigned on December 9, 2022, to join Mr Campbell and Felix Stubbs, the former IBM Bahamas chief, as a whistleblower when they met with the regulator on October 11, 2022, to voice concerns about the platform’s operations and corporate governance structure.

“Mr Campbell, in particular, who is a silent investor in the company and invested roughly $1.2m, expressed deep concerns about the direction and operations of the company,” the Securities Commission’s winding-up petition alleged.

The former Colina chief asserted “that since operations began the company had been cash strapped, and that roughly $1.5m received from investors had been spent as only one out of the six crowdfund offerings that was listed on the platform had met its minimum ask”.

It was also claimed that ArawakX staff “had not been paid for several months”, while $40,000 “was moved from the fiduciary account to the operating account” - suggesting that client/investor monies were used to finance the platform’s operating expenses. When this was brought to Mr Rahming senior’s attention, he allegedly described this as “an error”.

Mr Campbell also alleged that senior ArawakX executives were travelling and spending lavishly to promote the business, which he argued was not wise given the company’s financial position.