The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas’ first-ever crowd-funding platform will suffer “serious harm” if it is placed into provisional liquidation before it can pursue or settle its legal battle with Bank of The Bahamas over the freezing of its accounts.

D’Arcy Rahming senior, ArawakX’s president, in an October 12, 2023, affidavit alleged that the Securities Commission’s bid to wind-up the company will “undermine” litigation against the BISX-listed bank over the six-month account lock-out that was sparked by a separate fight with its major investor (see other article on Page 1B).

His concerns were voiced as part of a last-ditch, 11th hour legal bid by ArawakX to have the Securities Commission’s winding-up petition thrown out on the basis of legal technicalities. Filed just one day before Friday’s winding-up petition hearing before Chief Justice Sir Ian Winder, the strike-out application called on the Supreme Court to throw the matter out because the action and supporting documents were “unsealed” when served on the platform.

ArawakX is now urging that the winding-up petition “be struck out” on this basis, and because it was “filed and served.... unreasonably, unlawfully and ultra vires” the Supreme Court Act. It is also seeking dismissal on the grounds that the Securities Commission’s action is “oppressive, irregular, nullities and/or otherwise constitutes an abuse of the process of the court”.

Tribune Business understands that while initial service on ArawakX was indeed “unsealed”, this was the fault of the Supreme Court registry rather than the Securities Commission or its attorneys. And this issue was subsequently resolved by having the legal papers reserved properly with the Supreme Court seal on them.

Mr Rahming’s affidavit, meanwhile, sought to challenge the appointment of James Gomez, the Ecovis Bahamas accountant and partner, as ArawakX’s provisional liquidator if the winding-up petition proves successful when Sir Ian delivers his ruling on November 9, 2023 (see report on Page 3B).

The ArawakX sought to imply that Mr Gomez had several potential conflicts of interest should he take on the ArawakX assignment, although these seemed a slight stretch. Several revolved around Mr Gomez’s chairmanship of Bahamas Resolve, the bail-out vehicle that helped rescue Bank of The Bahamas by taking on its toxic commercial mortgage loans in 2014 and 2018. The crowd-fund platform, of course, is now litigating against the latter.

Also cited were Mr Gomez’s and Bahamas Resolve’s alleged ties to Simon Wilson, the Ministry of Finance’s financial secretary, who ArawakX was dealing with in trying to develop a proposal for the creation of a Government Retail Savings Bond that would be listed and issued via the crowd-funding platform.

Besides maintaining that Mr Gomez would be “wholly unsuitable” as provisional liquidator, Mr Rahming reiterated: “There is no reasonable or lawful basis for the appointment of a provisional liquidator... The respondent [ArawakX] has remained available to the applicant [Securities Commission] throughout its investigation, and the applicant has failed to articulate any concerns to the respondent about misconduct or mismanagement on its part.”

Mr Rahming said concerns over ArawakX’s corporate returns “are all soluble” after the crowd-funding platform switched corporate services providers. “We believe the request for a provisional liquidator at this early stage is designed and intended to undermine the respondent’s ability to defend itself against the applicant’s unreasonable and unlawful actions herein,” he alleged.

“We are also presently engaged in sensitive and critical litigation and negotiations with Bank of The Bahamas, and the appointment of a provisional liquidator would not only undermine our ability to defend this action but would do serious harm to our negotiations with Bank of The Bahamas.”

Mr Rahming, in a subsequent interview with Tribune Business, said ArawakX’s case against Bank of The Bahamas is due to come up for hearing before the Supreme Court later this month and before the Chief Justice renders his decision on the winding-up.

“We know we’re the wronged party,” he added. “We have been severely damaged as a result of it, and are eager to present our case in the court. We have every confidence in the legal system and the judicial process.”

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 with its accounts 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 James Campbell, its largest investor, who had injected some $1.6m into it.

“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.

Documents viewed by Tribune Business reveal that ArawakX contacted all of Prime Minister Philip Davis KC; Michael Halkitis, minister of economic affairs; and Central Bank governor, John Rolle, in early November 2022 in an attempt to pressure Bank of The Bahamas to unfreeze its accounts.

Mr Rahming wrote to both the Prime Minister and Mr Halkitis, given that Bank of The Bahamas is majority government-owned, via an e-mail headlined: ‘Urgent: Injustice in financial markets to small investors’.

“Please find attached a letter regarding a grave injustice being done to investors in the country by the Bank of The Bahamas that needs your urgent intervention,” Mr Rahming wrote to Mr Davis and Mr Halkitis.

Then-Bank of The Bahamas managing director, Kenrick Brathwaite, was left distinctly unimpressed. “It is unfortunate that you have chosen to communicate in this manner considering that you are fully aware of the total circumstances which have caused this bank to place a freeze on your account,” he told Mr Rahming in a November 2, 2022, e-mail.

“The situation that caused this ongoing apparent conflict within the company is as a result of decisions made by the principals and may result in unnecessary exposure to Bank of The Bahamas. Incidentally, the captioned referring to any injustice appears a bit disingenuous when we consider the cause of this conflict and the fact that our duty is to mitigate any possible exposure as a result of this ongoing internal conflict.”