Second Affidavit of Christina R. Rolle in Reply to the Affidavit of D'Arcy Rahming Sr.

COMMONWEALTH OF THE BAHAMAS
IN THE SUPREME COURT
Commercial Division

2023
COM/com/00053

IN THE MATTER of the Companies Act, 1992

AND

IN THE MATTER of an Application under the Securities Industry Act, 2011

AND

IN THE MATTER of MDollaz Ltd. (trading as Arawak X), a Registered Marketplace and Clearing Facility

SECOND AFFIDAVIT OF CHRISTINA R. ROLLE IN
REPLY TO THE AFFIDAVIT OF D’ARCY RAHMING
SR. DATED THE 26TH SEPTEMBER 2023

I, Christina R. Rolle, Executive Director of the Securities Commission of The Bahamas (“the Commission”), New Providence, one of the Islands of the Commonwealth of The Bahamas, make oath and say as follows:

I make this Second Affidavit on behalf of the Petitioner (also hereafter referred to as “the Applicant”) in my aforesaid capacity as the Executive Director of the Commission.
I am the same person who, in my said capacity, swore the Affidavit filed on 18 September 2023 (the “Principal Affidavit”), and I am also duly authorized to make this Second Affidavit on the Petitioner’s behalf. The facts deposed to herein are within my own knowledge or are obtained from documents in possession of the Commission or its legal advisors as the case may be, and are true to the best of my knowledge, information and belief.
This Second Affidavit is filed in reply to the First Affidavit of D’Arcy Rahming Sr., filed on 27 September 2023, in response to the Principal Affidavit, aforesaid.
Terms used and defined in the Principal Affidavit will, where relevant, bear the same meaning when the same are used in this Second Affidavit.
The Commission, without retelling the events leading to same, here refers to the Principal Affidavit which outlined the Applicant’s position based on information received in the course of its investigation, and much of which came from the Respondent.
The Commission rejects the Respondent’s affidavit in response inasmuch as it is wholly unresponsive to the issues giving rise to the Commission’s application. The Commission here replies to clarify and correct certain matters raised therein, where and as necessary.
Per the Commission’s records, Mr. D’Arcy Rahming Sr. was appointed in 2006 to the Commission’s Disciplinary Committee which existed under the Securities Industry Act, 1999. This Committee was authorised in statute to meet and consider the conclusions of the investigations conducted by management. After meeting, the Committee was further authorised to: 1) dismiss the matter; 2) issue a letter of caution or some other informal remedial action; 3) authorise the issuance of a formal complaint; or 4) refer the matter to the Attorney General. With the enactment of the Securities Industry Act, 2011 (five years later) the Disciplinary Committee ceased to exist and its functions were subsumed by other processes within the Commission. This is notable for the following reasons:
a. The Commission’s disciplinary tools and processes have been substantively changed by legislation since Mr. Rahming Sr.’s involvement; and b. Mr. Rahming Sr.’s prior involvement with the Commission should give him a better appreciation of his regulatory responsibilities and the need to adhere to them.
The Commission notes that in their affidavit of 27 September 2023, the Respondent:
a. rejects that they are insolvent and asserts that there are no financial claims or demands against the Respondent; b. asserts that they have pipeline business that addresses the issue of insolvency;
c. denies both commingling and use of client funds to fund their operations;
d. asserts that the Commission is aware that Mr. James Campbell’s claim to a seat on the board is false and that the Commission “continued to press and pressure the Respondent...to accommodate Mr. Campbell.” Further, the Respondent asserts that the Commission is aware that Mr. James Campbell is seeking an equity position in the Respondent rather than payment of his outstanding loan; e. asserts that the Commission has made no findings of wrongdoing against the Respondent such as to deprive the Respondent an opportunity to address its solvency issues, as discussed in a 12 April 2023 meeting (see CRR8 of the Principal Affidavit); f. asserts that the Commission “has failed to demonstrate a public interest justification...” in seeking to windup the Respondent; g. asserts that the Commission’s “prolonged investigation has effectively starved the Respondent by preventing its operation” and that there was “a year of mandatory inactivity;” and h. asserts that the Commission has not afforded the Respondent due process.
In summary, well before the Commission’s investigation began, the Respondent became insolvent through its own actions, particularly due to excessive operational spending and a lack of revenue to support their operational spending. The Commission notes that in paragraph 20 of the Principal Affidavit, the Commission initially became concerned with respect to the solvency of the Respondent. Further, the Commission took measured steps to investigate the Respondent’s solvency and to allow them an opportunity to provide evidence, justification and solutions to their solvency issues. See for example, paragraphs 25, 62 and 64 of the Principal Affidavit.
The trigger for the investigation of the Respondent’s insolvency, was the Commission’s review and analysis of the management accounts prepared by the Respondent and received by the Commission at the time of the onsite examination. Based on the information provided, the Commission calculated a negative working capital of $213,626.31. Now shown to me is a true copy of the management accounts as at 31 July 2022 signed by Mr. D’Arcy Rahming Sr. on 30 August 2022 exhibited hereto as “CRR 1”.
In concluding on the Respondent’s insolvency, the Commission considered and/or relied on:
a. The preliminary analysis and responses of LDL & Associates (the Respondent’s auditors) with respect to the financial position of the Respondent as outlined in an email to the Commission dated 23 June 2023 and attached to the Principal Affidavit as CRR16; b. The draft audited financial statements provided by the Respondent’s auditors on 11 July 2023 and attached to the Principal Affidavit as CRR21; and
c. The Commission’s own analysis of the draft audited financial statements.
The Commission notes that the draft audited financial statements reflect accounts payable and accrued expenses totalling $1.2 million. Additionally, the drafts reflect other liabilities such as:
a. Bank loans in the amount of $349,605; b. Due to a related party in the amount of $293,957;
c. Due to subscribers (client funds) in the amount of $181,329;
d. Due to subscribers (company shares) in the amount of $1.9 million; and e. Redeemable preferred shares in the amount of $50,000.
Therefore, the Respondent’s own classification of their debt total approximately $4 million.

The Commission is unaware that the subscribers in company shares have agreed to be reclassified as debt. Further, the Commission is not aware that redeemable preference shares validly exist or existed. This creates a number issues that can only be properly addressed by a provisional liquidator who must, after investigation and under Court Supervision, determine the proper classification for these subscribers. The issues and concerns of the Commission, with respect to these subscribers, are as follows:
1. Beyond an inflated and unsubstantiated valuation, the Commission is not aware of the details of any other representations which may have been made by the Respondent to each subscriber in the Respondent’s shares. Nor is the Commission aware whether the subscribers had knowledge of the accurate share structure and the financial position of the Respondent (including the Respondent’s outstanding debt and issued equity) at each share offering;
2. On the face of the subscription agreements, it appears that each person subscribed to shares of the Respondent;
3. None of the subscribers appear in the shareholder register of the Respondent nor is the Commission aware that shareholders’/directors’ resolutions were passed in order to issue shares to each subscriber or to enter into the subscription agreements. This situation is compounded by the uncertainty resulting from overriding powers granted by the Respondent to Mr. James Campbell (which may or may not be in effect), outlined at paragraphs 21-27 below, and it leaves the Commission in a quandary as to the governance and shareholder structure of the Respondent;
4. The Commission is not aware that the subscribers have agreed, or would agree, to be reclassified as creditors of the Respondent;
5. The Commission is unable to regularise these subscribers as shareholders, or to approve their reclassification as creditors, of the Respondent. In the case of the former, the Commission cannot regularise the subscriptions as to do so would: 1) mean that the Respondent would be sanctioned by the Commission as a public company (and one who is insolvent, at that) without having complied with the regulatory processes to become a public company (and thereby subject to a public company’s reporting obligations); and 2) be in contravention of clauses 8 & 9 of the Memorandum of Association of the Respondent. Now shown to me is a true copy of the Memorandum and Articles of Association of the Respondent exhibited hereto as “CRR 2.”
The Commission further notes, contrary to paragraph 24 of the Respondent’s Affidavit that it, “is not the subject of any financial claims or demands as at the date hereof.” The Respondent was, and still remains, indebted to persons, including the provider of its ArawakX crowdfunding platform as follows –
a. CrowdEngine: On 26 September 2023, the Commission received an email complaint with attached invoices running from March 2022 to July 2022, from GGR Inc., a collections agency acting for CrowdEngine, a provider of services to the Respondent for its ArawakX crowdfunding platform, aforesaid. The email revealed that the Respondent has this outstanding claim, being indebted to CrowdEngine in the amount of $27,916.33USD. Now shown to me are the email and attached invoices marked and exhibited as “CRR 3(a)” through “CRR 3(f)”. b. Sandy Port Development Company Limited: On 8 August 2023, The Tribune reported that the Respondent was evicted from its premises for being in default of their lease and has been requested by the Landlord to cure the default. The Respondent is quoted in The Tribune’s article as confirming that the default mentioned by the Landlord is indeed a default in payment. Now shown to me is a true copy of The Tribune article dated 8 August 2023 and exhibited as “CRR 4.”
Tied to the Respondent’s solvency claims is the assertion that there is pipeline business that should be considered by the Commission. 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.
Notwithstanding the Commission’s inability to consider the pipeline business as a solution for insolvency, the Commission has reviewed a list of pipeline business (with projected income in the range of $2.4 - $4.7 million) provided by the Respondent on 8 May 2023. Now shown to me is a copy of the documents provided by the Respondent outlining the pipeline business, exhibited hereto as “CRR 5.”
The Commission’s analysis of the so called pipeline revealed:
a. There were 24 potential companies listed of which, 6 offerings were already concluded. Of the 6 concluded offerings, 4 were successful raises and 2 failed; b. From the 6 concluded offerings, the Respondent projected maximum fees of $1.16 million whereas, the actual success fees totalled approximately $254,000;
c. Of the remaining 18 companies, 7 companies are indicated as having a listing agreement with the Respondent, 3 companies are indicated as having a non-binding MOU or agreement, 7 companies have no agreement but a letter from the Respondent’s Chief of Equities to the prospect requesting confirmation of continued interest to list;
d. Based on the historical success rates of the 6 concluded listings (with 67% success rate and 32.56% actual vs. projected fees on successful raises), the Commission estimates that the Respondent could reasonably project income of approximately $806,410.64 on their pipeline of 18 companies. Given that only 7 of the 18 are indicated as having a listing agreement, that projection should be reduced to approximately $176,703. Now shown to me is a true copy of the Commission’s spreadsheet, exhibited hereto as “CRR 6.”
The Commission further notes that with respect to its pipeline business, the Respondent is reported in The Nassau Guardian on 3 August 2023 to have issued a statement indicating that they have “28 companies ready to list, awaiting approval from the SCB.” The Commission expressed its concern over these statements to the Respondent in our letter dated 3 August 2023 which was attached to the Principal Affidavit (CRR23). The Commission notes that at no time, since the Commission’s investigations began, did the Respondent submit an application for the approval of any of its pipeline business despite the Commission indicating to the Respondent on 12 April 2023, its willingness to consider its pipeline business notwithstanding the conditions that were placed on the Respondent’s registration on 23 March 2023 (beginning at page 35 of CRR8 of the Principal Affidavit). Now shown to me is a copy of the mentioned Nassau Guardian article dated 3 August 2023, exhibited hereto as “CRR 7.”
Moreover, the Commission notes that the Respondent is reported by The Tribune on 13 September 2023 as having made statements that the timing of the prohibition on new capital raises “interrupted” the already launched bid of Nassau Gas. The Commission is concerned by the reckless disregard for the truth as revealed by these statements, noting that, per the Commission’s records, the Nassau Gas capital raise should have ended since 31 January 2023, at the very latest. The Commission’s conditions on the Respondent’s registration commenced from 23 March 2023, restricting its ability to accept “new” business (which should not have impacted Nassau Gas in any event). Now shown to me is a copy of the mentioned The Tribune article dated 13 September 2023, exhibited hereto as “CRR 8.”
With respect to the issue of commingling, the Respondent asserts that they have not commingled clients’ funds and further asserts that the appearance of such is as a result of mislabelling by the Bank of The Bahamas and/or the incompetence of the former CFO. The Commission stands by its previously stated findings and notes that the Respondent has not taken any steps to correct what they have deemed as errors on the part of others.
With respect to the use of client funds to fund the operations of the Respondent, the Commission refers to various loan agreements, signed by the Respondent with PJ Enterprises and attached to the Principal Affidavit as CRR 19 and CRR 20. In the case of a loan dated 27 January 2022, some stated purposes include:
a. Red Lobster payout in the amount of $95,500; and b. Securities Commission issuer fees in the amount of $9,257.
In another loan dated 25 March 2022, the purpose of the loan is indicated as “Mifi investor refund request” in the amount of $68,486. The Commission notes that in the case of each of these stated purposes, the Respondent should not have needed to seek a loan for these purposes as they should have been holding the required client funds in a fiduciary capacity. Based on this documentation, there is in the Commission’s judgment the irresistible inference that the Respondent used client or fiduciary funds to defray shortfalls in the Respondent’s financial obligations to other parties.
The Commission received a resolution dated 10 January 2022 appointing Mr. James Campbell as a director of the Respondent. The Commission also received a Directors resolution dated 10 January 2022 which sought to amend the Company’s articles of Association inserting overriding provisions which included at Article 144, “A majority of the Directors of the Company shall at all times consist of the persons nominated by James Alfred Campbell”. Now shown to me are true copies of the mentioned resolutions dated 10 January 2022, exhibited hereto as “CRR 9” and “CRR 10”.
The Commission was further presented with a resolution dated 4 October 2022 which then sought to revoke the previous resolutions amending the Articles of Association with respect to the overriding provisions previously inserted on 10 January 2022. The Commission was also provided with a resolution dated 5 October 2022 which laid out various details relating to Mr. James Alfred Campbell and resolving among other matters that there be “the immediate pausing of the application to the Commission for directorship for additional directors including Mr. James Campbell”. Now shown to me are true copies of the mentioned resolutions dated 4 October 2022 and 5 October 2022, exhibited hereto as “CRR 11” and “CRR 12”.
At no time did the Respondent submit an application for the approval of Mr. James Campbell as a Director of the Respondent. Mr. James Campbell applied to the Commission to be approved by the Commission as a Director of the Respondent, however, the Commission requires the application to be made by the Respondent. The Respondent has declined to make the application for directorship. The Commission is not in a position to discern Mr. Campbell’s proper status as a Director (or not) of the Respondent and the Respondent has not offered the Commission a legal opinion with respect to the same.
These circumstances represent for the Commission a major governance irregularity and a potential civil claim against the Respondent.
The Commission was copied on correspondence dated 11 May 2023 to Mr. Kahlil Parker K.C., by Higgs & Johnson, the Attorneys for PJ Enterprises Ltd. Attached to the correspondence is a Conversion Note for one (1) share in the Respondent. Per the Conversion Note, PJ Enterprises Ltd, has not exercised its rights of conversion for notes numbered 2 to 1,340,000. Now shown to me is a true copy of the correspondence and Conversion Note, exhibited hereto as “CRR 13 (a)” and “CRR 13 (b).”
On 5 July 2023, the Commission queried the Attorney for the Respondent as to whether the Respondent was in receipt of the Conversion Note and requested the updated status of the shareholding. On 7 July 2023, the Attorney for the Respondent responded to the Commission, disputed the claim of PJ Enterprises and said that the Respondent was not prepared to register such transfer. Now shown to me is a true copy of the email thread and letter in response, exhibited hereto as “CRR 14 (a)” and “CRR 14 (b).”
The Commission is surprised by the assertions in the Respondent’s Affidavit which seem to suggest the Respondent is still considering the Conversion Note when the position was previously stated as being rejected by their Attorney. The Commission notes that had the Respondent accepted the Conversion Note and sought to issue the share certificate with the Commission’s required approval, PJ Enterprises would be both a holder of one share as well as the major creditor of the Respondent.
With respect to findings of wrongdoing, the Commission notes that there are governance concerns as stated above, including:
a. use of client funds as noted in the Principal Affidavit and noted above; b. repeated misrepresentations to the public, an example of which is outlined in our letter dated 3 August 2023 attached to the Principal Affidavit as CRR 23;
c. raising of capital without the Commission’s consent or approval, the regularization of which is not possible due to issues and concerns outlined in paragraph 12 above; and
d. Repeated failure to obtain necessary approval from the Commission as required.
For the avoidance of doubt, the Commission has preliminarily identified additional breaches of the Act and related legislation, including:
a. Failing to pay distribution funds within time stipulated contrary to rule 11 of the Rules; b. Failing to return purchaser funds contrary to rule 24 of the Rules;
c. Failing to maintain solvency requirements per rule 17(4) of the Rules and reg. 38(2) of the SIR;
d. Failing to apply to the Commission prior to taking certain actions where statutorily obligated, per regulations 33 and 34 of the SIR; e. Failing to notify the Commission of financial issues per regulation 27(2)(k) of the SIR; and f. Carrying out an unauthorized distribution or offering which is a criminal violation per section 97 of the Act.
With respect to the Respondent’s assertion that the Commission has failed to justify winding up the Respondent, the Commission refers to all of the grounds referred to above and notes that 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.
The Respondent’s assertion of the Commission starving its operations and there being a year of mandatory inactivity is false. The Commission notes that the investigation began on 11 October 2022, however, no restrictions were placed on the Respondent with respect to their business activities until 23 March 2023. These restrictions were placed, following the Commission’s examination and as a result of the Commission’s concerns related to the business practices, governance issues and solvency of the Respondent. They accepted the restrictions and did not at any time make application for the approval of new business, which the Commission indicated they would be willing to consider notwithstanding the restrictions on the registration. Furthermore, the Commission notes that the Respondent could not properly fund its operations prior to the Commission’s investigation and continuously sought capital to do so.
The cease and desist order dated 8 June 2023, was necessary in light of the Commission’s concern that the Respondent was:
a. Making misrepresentations and/or not adequately disclosing to the public, information with respect to their financial position; and b. Raising capital as a public company without the approval of the Commission.
All of the relevant correspondence regarding the same is attached to the Principal Affidavit.
With respect to the Respondent’s claim of lack of due process, the Commission notes that it has given the Respondent numerous opportunities to appear before the Commission to address issues of concern regarding its business practices, governance issues and solvency. The Commission has sought to assist the Respondent by pointing them in the right direction on issues which were critical to be addressed as noted in our 12 April 2023 meeting transcript, suspension letter dated 30 August 2023 as well as 12 September 2023 email to the Respondent’s Attorney, all of which are attached to the Principal Affidavit. Furthermore, on 13 September 2023 the Respondent was given the opportunity to be heard in accordance with the legislation. However, they squandered that opportunity and upon attending the Commission, the Respondents advised that they came to the meeting with the intention of not addressing any of the concerns at that time.
The Commission stands by its original assertion that the issues, all of which have not been enumerated in this or the Principal Affidavit, 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.
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 of the Respondent.
That the contents of this Affidavit are true and correct to the best of my knowledge information and belief.

SWORN TO in the City of Nassau }
This 4th day of October A.D., 2023 }

[Signature]
BEFORE ME,
[Signature]
NOTARY PUBLIC

COMMONWEALTH OF THE BAHAMAS
IN THE SUPREME COURT
Commercial Division

2023
COM/com/00053

IN THE MATTER of the Companies Act, 1992

AND

IN THE MATTER of an Application under the Securities Industry Act, 2011

AND

IN THE MATTER of MDollaz Ltd. (trading as Arawak X), a Registered Marketplace and Clearing Facility.

CERTIFICATE

These are the Exhibits marked “CRR 1” through “CRR 14” referred to in the Second Affidavit of Christina R. Rolle, filed herein and dated the 4th day of October, 2023.

Before Me,
[Signature]
Notary Public

COMMONWEALTH OF THE BAHAMAS
IN THE SUPREME COURT
Commercial Division

2023
COM/com/00053

IN THE MATTER of the Companies Act, 1992.

AND

IN THE MATTER of the Securities Industry Act, 2011.

AND

IN THE MATTER of MDollaz Ltd. (trading as Arawak X), a Registered Marketplace and Clearing Facility.

AFFIDAVIT IN REPLY OF CHRISTINA R. ROLLE LIST OF EXHIBITS

Management accounts as at 31 July 2022 signed by Mr. D’Arcy Rahming (CRR1)
Memorandum and Articles of Association of Respondent. (CRR2)
Re: Crowd Engine - Email & invoices:- (CRR3 A-F)
a) Email dated 26 Sept. 2023 from GGR Inc. for CrowdEngine crowdfund software provider (CRR 3a) b) Invoice – March2022 (CRR 3b) c) Invoice – April2022 (CRR 3c) d) Invoice – May2022 (CRR 3d) e) Invoice – June2022 (CRR 3e) f) Invoice – July2022 (CRR 3f)
The Tribune article dated 8 Aug. 2023 – (Re-Eviction notice) (CRR4)
Pipeline business of Respondent (docs) (Redacted) (CRR5)
SCB spreadsheet analysis of pipeline business (redacted) (CRR6)
The Nassau Guardian article dated 3 Aug. 2023 (CRR7)
The Tribune article dated 13 Sept. 2023 (CRR8)
Resolution dated 10 Jan. 2022 (CRR9)
Resolution dated 10 Jan. 2022 (CRR10)
Resolution dated 4 Oct. 2022 (CRR11)
Resolution dated 5 Oct. 2022 (CRR12)
Email and Conversion note (CRR13a and 13b)
Email dated 7 July 2023 and Letter dated 7 July 2023 – (CRR14a and CRR14b)

[The remainder of the document consists of the exhibits listed above, including the Balance Sheet, Memorandum and Articles of Association, and email correspondence.]

Second Affidavit of Christina R. Rolle in Reply to the Affidavit of D'Arcy Rahming Sr.

Lineage: In force