By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A former Colina Insurance Company chief and at least 115 fellow investors are in peril of losing most, if not all, their combined $2.4m-plus investment in the insolvent ArawakX crowd-funding platform.

Ed Rahming, the Intelisys (Bahamas) principal, and Cheryl Simms, the Kikivarakis and Company accountant, in their February 22, 2024, report to the Supreme Court in their capacities as provisional liquidators disclosed legal opinions finding that James Campbell and his investment vehicle, PJ Enterprises, are unsecured creditors for much of their $1.619m investment.

They were also informed that the majority of other investors who acquired shares in ArawakX, some 115 of 134 persons, should definitely be treated as unsecured creditors after parting with a collective $817,712 to purchase equity stakes in the crowd-funding platform. Given that ArawakX already has a near-$4m solvency deficiency, which is likely to only increase, prospects of substantial recovery appear bleak.

Raynard Rigby, the joint provisional liquidators’ attorney, in a January 29, 2024, legal opinion on Mr Campbell’s standing in the liquidation indicated it was possible that the collective $279,767 in loans advanced by the ex-Colina boss to ArawakX could achieve a higher ranking that ‘unsecured creditor’ in the queue waiting to recover assets. Unsecured creditors are typically at the back, or last in line.

“We have no information in respect to whether these sums were in fact advanced by PJ Enterprises and/or repaid by MDollaz Ltd,” Mr Rigby wrote, the latter name referring to ArawakX’s immediate parent company.

And, while the January 31, 2022, loan agreement gave it “priority over all unsecured creditors and all shareholders” in the event ArawakX was dissolved or wound-up, Mr Rigby again wrote: “We have not been provided with a duly executed floating charge/debenture by the company unto PJ Enterprises.” That agreement was for the first of three loans, and was worth $162,010.

The majority of Mr Campbell’s ArawakX investment was $1.34m used to purchase “zero coupon convertible notes” on MDollaz Ltd. These notes could be converted to 2,279,819 ordinary shares, equal to 22.798 percent of the crowd-fund platform’s total equity, but he elected to convert just one note and the shares were never distributed.

Mr Rigby, concluding his analysis, said: “MDollaz Ltd appears to owe to PJ Enterprises the borrowings under the short-term [loan] agreements... It may be open to PJ Enterprises to argue that its short-term loans were secured loans pursuant to a floating charge. PJ Enterprises may not be a secured creditor if the floating charge was not perfected.

“In respect of the [convertible notes], this appears not to be intended to create a security charge over MDollaz Ltd’s assets. The terms allow for the coupon to be converted into shares and for payment to rank ahead of preference and ordinary shareholders. In this regard, PJ Enterprises is likely an unsecured creditor.”

Mr Rigby also found that the 134 investors who paid a collective $817,712 to acquire ArawakX ordinary shares, via subscription agreements, in what his joint provisional liquidator clients are alleging was an illegal public offering that violated the Securities Industry Act and represents a “criminal infraction”, should also largely be treated as unsecured creditors - except for one group.

Asserting that the resolution increasing ArawakX’s number of ordinary shares, so as to facilitate the buy-in by extra investors, was “invalid”, the Baycourt Chambers chief said the crowd-funding platform’s number of shares remained at the original 5,000 divided equally between its two principals, D’Arcy Rahming senior and his son, D’Arcy junior.

“Based on the foregoing it is our considered opinion that the 134 subscribers are not shareholders of MDollaz Ltd,” Mr Rigby wrote. “For completeness, we do not deem the shareholders/subscribers to be preferred creditors.”

Mr Rahming and Ms Simms, dividing the unsecured creditors into categories, said any of the 19 former ArawakX staff who received shares in the company in exchange for unpaid salaries will be treated as preferential creditors. Otherwise, all of the other 115 will be unsecured creditors.

The latter include 63 investors who paid a total $208,316 to acquire shares in the crowd-fund platform, plus another 32 who were on a payment plan and had paid a combined $81,398. The provisional liquidators said they still have to determine the status of 17 investors, nine of whom are foreign and others related to the company’s vendors.

However, the one secured creditor that possesses the necessary stamped and recorded charge over ArawakX’s assets is the Government-owned Bahamas Development Bank (BDB). It advanced a $378,343 loan to the crowd-funding platform to enable it to acquire its software, equipment and furniture, some $140,000 of which was used to meet the Securities Commission’s capital and operational requirements.

“The loan is secured by a first mortgage over the company’s land and building, a chattel mortgage over various computer equipment and the crowdfunding software (Tagpay) purchased with the loan proceeds,” Mr Rahming and Ms Simms wrote.

“Through our examination we determined that the land and building, which represents the shareholders’ [the Rahmings’] contribution to the company in exchange for their shares, were not conveyed to the company. The company’s computers, land and building are pledged to the BDB as collateral for the loan payable.”

The BDB on December 12, 2023, demanded repayment of the now-delinquent loan. “We write to formally demand that the sum of $373,125.39, being principal due and unpaid on the said loan in the amount of $331,803.60 together with interest accrued and unpaid on the loan to the December 2023 in the amount of $41,189.79, and late fees in the amount of $132.00 be paid within 14 days,” wrote Keri Sherman, an attorney with Alexiou, Knowles & Co.

“Be advised, therefore, that in the event you shall fail to satisfy your/the company’s indebtedness to our client within 14 days of receipt of this letter, we have been instructed to commence legal proceedings against you in the Supreme Court for possession of the property secured by the mortgage and recovery of the sums due, together with interest thereon and legal costs.”