OBA: Arbitrade deal threatens our reputation

  • Beggars belief: Craig Cannonier, the Opposition leader, has called the Arbitrade saga an embarrassing shambles that cannot be good for Bermuda’s reputation (File photograph)

    Beggars belief: Craig Cannonier, the Opposition leader, has called the Arbitrade saga an embarrassing shambles that cannot be good for Bermuda’s reputation (File photograph)


A string of communications over cryptocurrency firm Arbitrade’s bid to set up in Bermuda revealed “an embarrassing shambles”, the Opposition leader said yesterday.

Craig Cannonier added he feared the island’s reputation had been put at risk after a worried managing partner of a US-based spice company and investor in Arbitrade wrote to David Burt, the Premier, and asked if Arbitrade was working with Bermuda and in operation on the island.

Mr Cannonier said: “The Arbitrade saga has become an embarrassing shambles that cannot be good for Bermuda’s reputation.”

He was speaking after The Royal Gazette revealed that a government official asked Arbitrade to keep its promise to donate $1 million for fintech development on the island.

Correspondence received in response to a public access to information request also showed apparent confusion among Cabinet Office figures over whether or not a memorandum of understanding with the company was ever reached.

The One Bermuda Alliance leader said: “It is astonishing that there was confusion within Government’s own fintech unit about whether an MOU was signed or not.

“It [beggars] belief that this specialist department could apparently not find a record of any agreement.”

Last night, David Burt, the Premier, said: “We are preparing Bermudians for the technology jobs of the future and I will not be deterred by the Opposition leader’s myopic focus on one of 80 tech companies that have incorporated in Bermuda since we took office.”

Mr Cannonier asked: “Why was Government seeking $1 million from the firm when it did not even have a licence to operate? This was clearly an act of desperation as Government knew that without that money, it could not fulfil a key promise on its only economic plan — the creation of a fintech centre, which was, indeed, later scaled down.

“Government’s excuse that it wanted to exercise ‘fiscal prudence’ over this scheme was clearly an extremely disingenuous statement to cover a failure to deliver on its promises.”

He added: “I am also extremely concerned that it appears that at least one investor was worried enough to contact the Premier suggesting that Arbitrade was trading on its relationship with Bermuda and asking ‘if they are inappropriately trading on a false relationship’ with the island. Is this the kind of reputation that Bermuda wants — on top of being blacklisted by the EU due to a basic error in drafting legislation?”

Mr Cannonier also asked about the status of other MOUs signed with the Government more than a year ago and how much the companies involved had invested in training schemes.

Arbitrade announced plans for the island last summer when it talked about a $1 million contribution for a fintech incubator.

The company also said it wanted to donate $125,000 to a variety of projects, including a gang violence reduction scheme that involved young people working on chicken farms, the Mirrors programme, Family Centre, and a programme for active shooter preparedness in schools and charities.

Copies of correspondence provided to The Royal Gazette last week showed Wayne Smith, the head of the fintech business unit, wrote to Len Schutzman, the Arbitrade chairman, to ask that “in accordance with the public announcement of July 2018” the company proceeded with its “commitment of a $1 million contribution to Bermuda Fintech Development Fund”.

The documents revealed that Cherie-Lynn Whitter, the Cabinet Office permanent secretary, earlier asked Mr Smith for a “copy of the MOU that speaks to the commitment”, but he replied that he could not find an agreement.

They also included an e-mail from Zach Bobker, a managing partner of a US-based online spice delivery service, who said he had invested in Arbitrade cryptocurrency token dignity, or Dig, since February 2018.

He asked Mr Burt if the Premier could clarify whether Arbitrade was working with Bermuda and was operating on the island. He said it seemed the company had “completely disappeared” on token holders since January.

Mr Bobker added: “Or, if you can’t speak directly on the matter perhaps you can gently encourage Arbitrade to get in touch with their token holders.”

Mr Bobker added: “If they are inappropriately trading on a false relationship with Bermuda, this would be important for us remaining token holders to know.”

Mr Smith told Mr Bobker that Arbitrade had not been granted a licence to launch an initial coin offering or to conduct digital asset business in Bermuda.

He added that the company could not operate from its Victoria Hall building on Victoria Street, Hamilton, until it obtained the required licences.

Mr Cannonier said there were questions Mr Burt should answer “urgently”.

He asked: “Does he still expect Arbitrade to donate $1 million to the fintech centre? If so, when? What about all the other donations that Arbitrade promised, such as the chicken farm? Has it donated the $45,000 it promised?

“Has the fintech centre started yet? If so, what is happening? Did the Premier reply to the concerned investor? If he did, what did he say?”

A government spokeswoman said on Saturday that no money had been paid into the fintech development fund.

The Premier explained: “We have an extremely high standard and the Government, in conjunction with the Bermuda Business Development Agency, will continue the work of attracting companies to our shores that can meet the Bermuda Standard.

“I am fully confident in the Bermuda Monetary Authority’s ability to scrutinise companies who wish to operate digital asset businesses in and from Bermuda, and look forward to the pace of job creation in this industry to accelerate as more companies become licensed.”

Senior executives at Arbitrade have not responded to requests for comment.

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Published May 7, 2019 at 8:00 am (Updated May 7, 2019 at 6:37 am)

OBA: Arbitrade deal threatens our reputation

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