By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas’ first-ever crowd funding platform yesterday saw its registration suspension extended until September 18 as it pleaded for more time to address Securities Commission concerns over its solvency.

D’Arcy Rahming senior, ArawakX’s chairman and chief executive, told Tribune Business that nothing was resolved in its battle with the Bahamian capital markets regulator during the two sides’ meeting although the platform has been given until tomorrow to provide “substantive answers” to questions surrounding its financial health.

Pledging that ArawakX will continue to “work in food faith” to satisfy the Securities Commission’s concerns, he said of yesterday’s encounter: “We let our lawyer, Khalil Parker KC, do all the talking. He had presented an earlier document to them saying we needed more time to prepare ourselves properly for the hearing. There was a lot of back and forth with regards to that.

“The meeting ended with the understanding that, by Friday [tomorrow], we will give them substantive answers to some of their questions with the hope of having another hearing.” Mr Rahming, though, said the Securities Commission did not explicitly commit to another meeting between the two parties, while affirming in response to Tribune Business questions that ArawakX’s registration suspension has been extended for a further five days.

The original 15-day suspension was due to have ended yesterday, coinciding with the hearing, but it is now due to last until this coming Monday. “They extended it to the 18th,” Mr Rahming confirmed.

“They haven’t given any indication that another hearing will be held post-Friday. We don’t want at any point to be seen as not in compliance and not working in good faith. We have been working in good faith.”

ArawakX is understood to fear that the Securities Commission’s ultimate goal is to petition the Supreme Court to place the crowd-funding platform into a judicial-supervised liquidation under its oversight. The regulator, in a late Tuesday night statement, confirmed that its probe relates to concerns over “the trading platform’s solvency”, although it provided no further details.

Mr Rahming, in exposing ArawakX’s woes publicly, linked its difficulties to a highly-publicised battle for control of the crowd-funding platform with one-time Colina Insurance Company president, James Campbell. Tribune Business disclosed in June how the fight with Mr Campbell, an ‘angel investor’ who provided ArawakX with a portion of its start-up funding, resulted in multiple bank accounts held with BISX-listed Bank of The Bahamas being temporarily frozen.

Those accounts were subsequently unfrozen via a May 16, 2023, order by Supreme Court justice, Simone Fitzcharles. However, Mr Rahming blamed the episode for triggering what he branded as a “never-ending” 11-month probe by the Securities Commission into the health of ArawakX’s operations, finances and business model.

He also disclosed that the battle with Mr Campbell began just as ArawakX submitted a proposal to the Ministry of Finance to develop what was described as a Government Savings Bond product that would be targeted at small Bahamian retail investors to help them build savings and wealth, as well as expand the pool of domestic debt purchasers.

“After a successful crowdfunding raise in 2021, ArawakX was approached by Simon Wilson, [the Ministry of Finance’s] financial secretary, who commissioned ArawakX to create a retail Bahamas Government Savings Bond product that would assist with the financing of the Government,” Mr Rahming wrote in a letter issued to the media.

“The team at ArawakX believes in financial inclusion, and that means getting assets into the hands of everyone. A product like the Bahamas Government Savings Bond, combined with our ability to market and reach the average person with our world-class technology, would create many new owners in the society. That’s what we are about, so we were attracted to designing this product in conjunction with the Ministry of Finance....

“In April 2022, ArawakX received a proposal signed by Simon Wilson and then proceeded to get the necessary approvals from the Securities Commission and Attorney General’s Office as they vet all government contracts.” Mr Rahming attached to his letter a five-page Bahamas Government Savings Bond “proposal”, which was signed by himself on April 11, 2022, and Mr Wilson some three days later on April 14, 2022.

The proposal seemingly emerged from a meeting between the two sides that discussed “how the Government of The Bahamas can utilise the ArawakX marketplace platform to develop securities that would allow the Government to more efficiently fund its overall deficit shortfall through wider local community participation”.

The crowd-funding entity suggested that the bonds be issued and traded via its platform, which would adopt the role of facilitator, with the Government filling the role of “market maker” and ensuring liquidity. This would “create a market that is perpetual”, with no fees imposed on small Bahamian investors for opening trading accounts with ArawakX. The proposal also called for the bonds to have “100 percent face value” when pledged as collateral to Bank of The Bahamas.

Promising that implementation would come at no cost to the Government, ArawakX said the plan would enable the Government “to get access to a cheaper source of funding from a broader base, including the unbanked”. The platform also pledged to develop savings plans for specific segments of the population, including children and civil servants.

With ArawakX also acting as clearing house, and registrar and transfer agent, for the proposed savings bond, its proposal added: “ArawakX will create a secondary market for these securities, thereby allowing for an additional exit strategy for holders of these securities looking for early payouts. ArawakX will create a primary and secondary market that will be accessible 24 hours, inclusive of mobile devices utilising the ArawakX portal.”

Mr Wilson yesterday confirmed that ArawakX’s Government Savings Bond proposal was genuine, but added that it had never advanced beyond this stage. He added that the crowd-funding platform’s product was different from the separate retail savings bond that is presently being developed by the Central Bank of The Bahamas because it targeted less wealthy investors.

“They are on the level,” Mr Wilson told Tribune Business of Mr Rahming’s letter. “That proposal, there was discussion, but it never got beyond that stage. There was nothing binding. It was just to see if it was feasible via crowd funding. The Central Bank is developing a savings bond, but this was a different product from the Central Bank.

“We said we’d look at it and see where it goes. This was a different, low income, perpetual, low-value debt opportunity investment where people could invest $5, $10 in government securities. It was subject to all regulatory approvals and so forth. It was a proposal, and it never went beyond the proposal stage.”

ArawakX released evidence that it had sought the necessary regulatory approvals. Christina Rolle, the Securities Commission’s executive director, responded to the crowd-funding platform’s request in a June 24, 2022, letter in which she wrote the regulator did not object provided it received the relevant offering documents and the necessary “due diligence” was done after each issue.

“Please be advised that the Commission has no objection to the securities that will be issued in tranches by the Bahamas Government on the ArawakX platform subject to” these conditions, Ms Rolle wrote. “Further, we confirm that Mdollaz Ltd is in no way prohibited, neither by Bahamian securities laws nor by the Commission, from engaging in business with and/or on behalf of the Government of The Bahamas.”

Mr Rahming yesterday said he was unsure of the Government Savings Bond initiative’s status, but argued that the product will “be a big help to the Bahamian people” as they could then bypass broker/dealer fees in opening savings accounts. He added that it would also enable hard-pressed families to build-up savings that would “make a big difference in their lives”.

The ArawakX chief added that the platform had been sent a draft contract, approved by the Attorney General’s Office, but had yet to review the document with its attorney to determine if the terms are acceptable and sign it. “We got it all the way to a contract with the Attorney General’s Office,” Mr Rahming said. “We got it approved by the Securities Commission, and we got it approved by the Attorney General’s Office.

“We had it sent to us by the Attorney General’s Office. As far as we’re concerned, we have not got any further information. We haven’t received any formal rejection of it, so that’s where it’s at. We got a signed proposal, and draft contract back from the Attorney General’s Office that approved it, with a few terms where we have to decide if we want to sign it or not. Our attorneys were looking at it. I don’t know where we’re at with that. We’ll see.

“I know the product will be a big help to the Bahamian people, as they will be able to have individual savings accounts without going through the broker/dealers. It will make it possible for a mother with two children to set aside $25 per week, and that makes a big difference to some people’s lives.”