By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Nearly 900 Bahamians who acquired equity ownership via this nation’s first-ever crowdfunding raise have lost their entire investment after the Red Lobster franchise “decided not to proceed” with its restaurant build-out.

Liquidators for the ArawakX crowd-funding platform revealed in a recent letter that Pinnacle Franchise Brands had abandoned plans to create a multi-location dining network in The Bahamas due to “circumstances beyond its control”.

These “circumstances” were not specified by Ed Rahming, the Intelisys (Bahamas) principal, and Cheryl Simms, the Kikivarakis and Company accountant, but are understood to refer to the passing of Pinnacle’s principal, Chris Mortimer, the late Galleria Cinemas chief and former Democratic National Alliance (DNA) deputy leader. Another factor is also thought to have been Red Lobster’s own financial woes in the US, which involved Chapter 11 bankruptcy protection.

Addressing investors in Pinnacle Franchise Brands, which was the first of four crowd-funding raises facilitated via ArawakX’s platform, the co-liquidators wrote: “Unfortunately, this issuer has decided not to proceed with the business planned given circumstances beyond its control. The joint official liquidators have provided this issuer with its share register. Your investment in this issuer is lost.”

The joint liquidators, in their first report to the Supreme Court on ArawakX’s demise, disclosed that records showed 868 investors parted with a collective $90,384 to purchase some 74,054 shares in Pinnacle Franchise Brands between August 23, 2021, and January 4, 2022. However, Tribune Business records reflect that the company’s principals stated on several occasions that the crowd-funding had actually raised a combined $350,000 in capital.

ArawakX’s liquidators advised Pinnacle Franchise Brands investors to contact James Owen, its now-former chief financial officer, for further information and provided both his office phone number and business e-mail address in the letter. However, Mr Owen, when contacted by Tribune Business yesterday, said he was unaware of this and voiced surprise given that he had stepped down as a director more than one year ago and has nothing to do with the company.

“No comment because I have nothing to do with it,” Mr Owen added. “I left a year-and-a-half ago if not two years ago. I’ve not seen anything and no one has contacted me. I don’t know anything about it. I can’t give a comment on that because I don’t know what the major shareholder has decided to do.”

That shareholder would be the estate and family of Mr Mortimer, who was the main equity investor and financial sponsor in Pinnacle Franchise Brands. However, when contacted in May 2024, Paulette Mortimer, his sister, told Tribune Business to speak to Mr Owen as “the one dealing with it all” - even though Mr Owen himself had previously referred this newspaper to Mr Mortimer’s family after confirming he had stepped down as director.

However, one source familiar with developments confirmed yesterday: “Red Lobster is not moving ahead given the liquidation in the US and that one of the partners [Mr Mortimer] had died.” Red Lobster’s US parent closed 99 restaurants and filed for Chapter 11 bankruptcy protection in the US in May 2024, although it subsequently emerged from this process after being acquired by a private investor consortium in September last year.

Tribune Business records reflect that Mr Mortimer and his family were said to have provided $1.5m, or more than 80 percent, of the total $1.8m funding raised by Pinnacle Franchise Brands with the $350,000 balance coming from the crowd-funding. The total loss suffered by these investors highlights just how risky this form of investing - injecting capital into small businesses and start-ups - can be if these ventures fare poorly.

However, given that Pinnacle Franchise Brands’ Red Lobster ambitions never got started and failed to get off the ground, there are likely to be demands for Bahamian investors to be refunded their monies and questions asked about how - and where - the $350,000 was used.

The liquidators also revealed that Nassau Gas & Tanks, the last of the four crowd-fundings facilitated by ArawakX and which began just one week before the platform was shut down by the Securities Commission, is working to reacquire the equity shares purchased by investors and reimburse them.

“This issuer has decided to buy back the shares of all investors from its crowdfunding raise,” Mr Rahming and Ms Simms wrote. “The issuer is in the process of obtaining the necessary approvals to conduct this exercise and will be contacting each investor shortly.

“The joint official liquidators have provided this Issuer with its share register and the KYC (know your customer) information of each investor from the crowdfunding raise.” Tribune Business understands that Nassau Gas & Tanks’ plans have not changed and it is waiting on the Securities Commission to give the go-ahead to begin the refund process.

The liquidator duo, in their report to the Supreme Court, said an unknown number of Bahamian investors had parted with $122,287 to purchase a total 14,830 shares in Nassau Gas and Tanks. Of the four capital raises facilitated by ArawakX, the liquidators revealed that three had not been provided with share registers letting them know who their shareholders and equity owners were.

“There are discrepancies with the share registers - investors are missing on the registers,” Mr Rahming and Ms Simms alleged. “Investors have not received their share certificates, and the issuers were assessed additional fees by the company not shown in their listing agreement.”

To complete the bleak picture, the liquidators said total investment write-offs are not just confined to investors in Red Lobster/Pinnacle Franchise Brands given that ArawakX is insolvent, with liabilities significantly exceeding assets, and little - if anything - of value worth recovering.

Apart from the 116 persons who invested a combined $2.4m in ArawakX itself, those who invested in one or more of the four crowd fund raises - but did not feature on any of the share registers to prove they actually parted with their funds - also face a total loss.

For those in the latter category, the liquidators warned: “Unfortunately, your investment is considered a liability of the xompany, MDollaz Ltd (ArawakX’s immediate parent). You are a creditor in the liquidation of the company. Unfortunately, the company is insolvent and therefore your investment is lost.”

Those who injected capital directly into ArawakX have fared no better. “The company is insolvent. The company has insufficient assets to meet its liabilities. The company is therefore not in a position to pay out a return on investment or to pay its liabilities. Unfortunately, your investment in the company is lost,” Mr Rahming and Ms Simms added.

Tribune Business reported last year that a former Colina Insurance Company chief and at least 115 fellow investors were in peril of losing most, if not all, their combined $2.4m-plus investment in the insolvent ArawakX crowd-funding platform.

The liquidators, in February 2024, 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 had a near-$4m solvency deficiency, which was likely to only increase, prospects of substantial recovery appeared bleak even then.

ArawakX’s principals prior to its Supreme Court-supervised liquidation were D’Arcy Rahming senior, the former Bahamas International Securities Exchange (BISX) chief operating officer, and his son, D’Arcy junior. However, the liquidators, in their first Supreme Court report, revealed that ArawakX’s insolvency has almost doubled from the Securities Commission’s initial $2m estimate after they wrote-off more than $1m in assets listed on its balance sheet.

This left the platform and its parent, MDollaz Ltd, with just $508,665 in assets to cover $4.474m in total liabilities, thereby producing a $3.965m deficit with the provisional liquidator duo warning this gap was only likely to increase since “significant sums [are] owed to third parties”.

Mr Rahming and Ms Simms said it was also impossible to cure MDollaz/ArawakX’s “criminal violation” of the Securities Industry Act as a result of the unauthorised public offering that persuaded 134 investors to inject capital into the crowd-funding platform.

The liquidators, in their letter, said their work was close to completion and they will be “making the dissolution application” to the Supreme Court to be released from their duties. “No further liquidation work remains outstanding,” they added.