The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas’ first-ever crowd funding platform has slammed as “ridiculous” assertions that it poses a threat to capital markets integrity while accusing regulators of portraying it as a “Mom and Pop” operation.

D’Arcy Rahming senior, ArawakX’s chairman and chief executive, told Tribune Business that the Securities Commission was “beating us over the head for every minor infraction” as the two sides continue to battle ahead of the October 13 Supreme Court hearing over the latter’s bid to wind-up the platform.

Responding to allegations by Christina Rolle, the Securities Commission’s executive director, that ArawakX’s placement into provisional liquidation “is necessary for the protection of the investing public and to maintain the integrity of the capital markets in The Bahamas”, he argued that the crowd-funding platform had done nothing to justify such actions.

Arguing that ArawakX has enjoyed a “two-thirds success rate”, with four of the six crowd-funding offers to-date meeting their minimum target raise, Mr Rahming also questioned why James Campbell, its largest investor, “would give us funds” totalling some $1.6m if it was commingling company and investor/client funds as alleged by the regulator.

“I’m looking forward to the day in court, and don’t think we’ve done anything or are in any way a danger to the public or the marketplace,” he argued. “It’s ridiculous. How are we a danger to the public if we have had a two-thirds success rate? Nobody complained about their funds, nobody complained about our service. 

“Yes, we are not perfect. We have challenges like any operator to improve our service to all stakeholders, but nothing to the level to wind me up without a hearing. We’ve done nothing to that effect.” Mr Rahming argued that “we also have to understand, respectfully, the limitations of the Commission”, asserting that it was a regulator rather than a commercial operator.

“Obviously we are the operators, we are the entrepreneurs and we are the ones who put our capital and that of others to use,” he added. “Respectfully, we are the better operator. We are the ones able to work with companies. We had Tropical Gyro, Footcare Rx and Nassau Gas. All along the naysayers were saying this is impossible, it won’t work. But despite severe challenges we have been able to work through it.

“As a former regulator, I can say the regulators have a very important job, and that’s to ensure integrity, to protect all stakeholders and to protect minority interests. But the regulators are not commercial operators. They should be enabling, not to beat you over the head for every minor infraction. The regulators should be there to enable commerce, make life better for you.”

Ms Rolle and the Securities Commission would likely vehemently disagree with the description of “minor infraction” to characterise what has occurred. In her latest affidavit, dated October 5, 2023, she reiterated her position that the crowd-funding platform’s solvency, operational and corporate governance woes are “insurmountable and, as such, the respondent must be wound-up.

“The appointment of a provisional liquidator is immediately necessary in order for further investigation to be done of the books and records of the respondent,” she added. “Based on all of the outstanding issues identified in this and the principal affidavit to-date, the continued operation of the respondent would be detrimental to the interest of the investing public.

“In meeting the Commission’s mandate to protect investors, the Commission is obliged to pursue the winding-up.... The winding-up of the respondent is necessary for the protection of the investing public and to maintain the integrity of the capital markets in The Bahamas.”

Mr Rahming, though, argued: “She’s trying to make us look like a ‘Mom and Pop’ operator.” He was backed by two other ArawakX executives, including Winston Rolle, its chief of equities and a former Bahamas Chamber of Commerce president, who argued that management “believe in the continued viability” of the crowd-funding platform “as demonstrated by its over-ready pipeline of business and its demonstrated success”.

“We remain committed to returning the respondent to successful operation,” Mr Rolle alleged. “The forced winding-up of the respondent on the false and flawed premises articulated by the applicant herein would not only be unreasonable and unfair, but also a personal tragedy for my colleagues and I, as well as our issuer and investors”.

ArawakX had supplied the Securities Commission with a “pipeline forecast” that “represents a capital demand of over $60m. These companies are at different stages of onboarding with an objective to be listed on the platform by the end of the year.

“There are other companies that we are in discussions with but are still being evaluated or working with their respective business development managers to fine-tune their products to meet our requirements. The companies represent a wide range of industries, and include companies from outside of The Bahamas seeking to raise capital and establish a presence locally, as well as local companies seeking to grow and expand their operations outside of The Bahamas.”

This, though, made little impression on Ms Rolle and the Securities Commission. She reiterated the regulator’s position that it cannot include unearned revenues or income in its calculation of ArawakX’s solvency. “Tied to the respondent’s solvency claim is the assertion that there is pipeline business that should be considered by the Commission,” she acknowledged in her latest affidavit.

“In its assessment of the solvency and financial fitness of its registrants, the Commission is not able to entertain hypothetical projections about future earnings. The respondent should be aware of this and the Commission is gravely concerned that they would make such assertions nonetheless.”

Ms Rolle, though, said that “notwithstanding the Commission’s inability to consider the pipeline business as a solution for insolvency”, the regulator had reviewed the forecast provided by ArawakX on May 8, 2023, which projected that it could earn fee income of between $2.4m to $4.7m from the crowd-fund offerings it had potentially lined up.

However, the Securities Commission chief alleged that, based on its analysis and ArawakX’s past fee earnings, the projections were likely overblown. “There were 24 potential companies listed, of which six offerings were already concluded,” Ms Rolle said. “Of the six concluded offerings, four were successful raises and two failed.

“From the six concluded offerings, the respondent projected maximum fees of $1.16m whereas the actual success fees totalled approximately $254,000. Of the remaining 18 companies, seven companies are indicated as having a listing agreement with the respondent, three companies are indicated as having a non-binding Memorandum of Understanding (MoU) or agreement, and seven companies have no agreement.”

While the latter category all possessed a letter from Winston Rolle, ArawakX’s chief of equities, requesting confirmation of their continued interest in listing, Ms Rolle alleged: “Based on the historical success rates of the six concluded listings (with a 67 percent success rate and 32.56 percent actual versus projected fees on successful raises, the Commission estimates that the respondent could reasonably project income of approximately $806,411 on their pipeline of 18 companies.

“Given that only seven of the 18 are indicated as having a listing agreement, that projection should be reduced to approximately $176,703.” As a result, the Securities Commission chief implied this will do little to address ArawakX’s solvency concerns in the regulator’s eyes.