Executive in fintech firm withdrew from Bermuda bank bid
A businessman pulled from the purchase of a bank after his financial history was revealed cofounded a fintech firm that has been given a licence by the Bermuda Monetary Authority.
New York-based Logan Sugarman remains a C-suite executive at Blockchain Triangle Systems, which was given a Class M digital asset business licence by the BMA in April, allowing it to conduct business activities involving digital assets.
But the company’s CEO said Mr Sugarman was “not in a control position”.
The DABA licence can be granted only if the regulator is satisfied that certain minimum criteria set out in the Digital Asset Business Act 2018 are met, including that the company has controllers and officers who are fit and proper persons.
It looks at the previous conduct in business or finance of those involved and, especially, considers any evidence that they have conducted themselves “in such a way as to cast doubt on [their] competence and soundness of judgment”.
Mr Sugarman was one of three men lined up to buy Bermuda Commercial Bank in 2019 but he was removed from the deal after Florida-based financial news website Offshore Alert reported details of US lawsuits and judgments involving him.
They included a bankruptcy filing in 2004 that was dismissed after the judge found that Mr Sugarman could satisfy his liabilities but did not want to and a 2016 eviction for unpaid rent from a Manhattan apartment.
The Offshore Alert article listed two judgments against him totalling more than $10,000 in Minnesota from 1999 and 2004; a federal tax lien for almost $400,000 which was released in 2010; a state tax lien for almost $36,000 in the State of New York which was released in 2011; and two eviction complaints in New York from 2015 and 2016 totalling $14,570.
Offshore Alert reported that four days after questions about Mr Sugarman’s financial history were sent to Permanent Capital Holdings Ltd — the Bermuda-registered company which wanted to buy BCB and of which he was a managing partner — it announced that he was no longer involved in the bank deal.
The article said Mr Sugarman was to have been a 20 per cent beneficial owner of BCB under the initial arrangement because of his 50 per cent shareholding of Bermuda-domiciled Permanent Capital IO Ltd, which, in turn, owned 40 per cent of Permanent Capital Holdings.
The prospective purchase involved Lewis Katz, of New York, also a 50 per cent shareholder of Permanent Capital IO and managing partner of Permanent Capital Holdings, and Chris Maybury, a British businessman who lives in Bermuda.
BCB was ultimately sold for $72.8 million to another company led by Mr Maybury, Provident Holdings Ltd.
A later Offshore Alert story, in April 2020, reported that Mr Sugarman had been sued by American Express two months before over an alleged unpaid credit card debt of almost $65,000 and that the action had been discontinued.
Mr Sugarman describes himself in his LinkedIn profile as a chartered financial analyst, technologist and operator who founded Blockchain Triangle in July 2019 and was a managing partner of Permanent Capital from October 2017 to March 2021.
Blockchain Triangle’s website describes him as cofounder and CRO, though it is not clear if this means chief risk or chief revenue officer.
The website lists him as being on its board of directors and refers to him as a managing partner of Permanent Capital.
But after the Royal Gazette reached out to Blockchain Triangle with questions, its CEO, Darren Wolfberg, asked where on the website it referred to the board.
After we shared the webpage, he e-mailed a register of directors and officers for the company, dated December 6, 2022, which did not include Mr Sugarman’s name.
Mr Wolfberg said Mr Sugarman ceased being a director “before we became DABA registered“. He did not respond to a request for the exact date or clarify Mr Sugarman’s full job title.
Mr Sugarman referred all comments to Mr Wolfberg in response to an e-mailed request for comment for this article. His e-mail response was received too late last night for inclusion in The Royal Gazette’s print edition.
But Mr Wolfberg said his financial history “has been resolved, as I understand it”.
He said that, despite Mr Sugarman being listed in the company’s C-suite on its website, “he is not a controller of the company, nor is [he] on the board of the organisation, nor does he hold more than 10 per cent of the company.
“He is a part-time consultant, his role was disclosed to the BMA and, again, he is not in a control position with the company.
“He is also not affiliated nor is a shareholder of Permanent Capital, and any of its entities.”
Blockchain Triangle Systems Ltd was founded by Logan Sugarman and Darren Wolfberg.
Mr Sugarman was previously on its board of directors, along with Mr Wolfberg; Lewis Katz, managing partner at Permanent Capital; Chancery Legal director Mark Pettingill; and BJ Arnold, Blockchain Triangle’s co-chief operating officer and the CEO of Ocean Crest Partners.
The share register for Blockchain Triangle Systems shows that New York-domiciled Permanent Capital Holdings IO LLC owns almost 30 per cent of its shares.
Mr Katz, who tried to buy Bermuda Commercial Bank along with Mr Sugarman and Chris Maybury in 2019, is an officer of Permanent Capital Holdings IO LLC.
Permanent Capital has three affiliated companies in Bermuda. In 2018, Mr Sugarman was a 50 per cent shareholder of Permanent Capital IO Ltd; in early 2019 Permanent Capital IO was a 40 per cent shareholder in Permanent Capital Holdings and Harbor View Nominee Services — an affiliate of Chancery Legal — held the remainder.
Bermuda-incorporated Ocean Crest Partners owns 30.2 per cent of Blockchain Triangle and Mr Wolfberg owns 17.6 per cent, while Bermudian businessman John Tartaglia and Chancery Legal lawyer Grant Spurling each own less than two per cent.
Mr Tartaglia, Blockchain Triangle’s chief information officer and chief operating officer, co-owns MM&I Holdings, an island company that stood to potentially net millions of dollars of public funds if it had been given a contract to provide a cashless gaming network management system for casinos in Bermuda.
MM&I’s plans were revealed in a 2017 special report by The Royal Gazette, which told how the company entered into a memorandum of understanding with the Government which was signed by the late Shawn Crockwell, when he was tourism minister, and Mr Pettingill, the Attorney-General at the time.
Mr Crockwell later tabled legislation to legalise casino gaming, which was passed by the House of Assembly. He and Mr Pettingill went on to represent MM&I — co-owned by Mr Tartaglia with Michael Moniz — after they left government and went into private law practice together.
Mr Tartaglia said in 2018 that MM&I no longer had “any interest in participating in the gaming industry in Bermuda”.
Mr Wolfberg said: “John Tartaglia has spent the last 33 years in operational risk management and business continuity planning and advises us in … continuity, resilience and cyber, alongside our chief information security officer.”
Mr Pettingill is general counsel of Blockchain Triangle. He represented Permanent Capital Holdings, whose managing partner was Mr Sugarman, in its bid to buy Bermuda Commercial Bank in 2019.
Mr Spurling is co-chief compliance officer and counsel at Blockchain Triangle.
The Blockchain Triangle share register shows that Harbor View Nominee Services holds almost 7.5 per cent of the shares in Blockchain Triangle on behalf of BFS Holdings Ltd.
Premier David Burt held a press conference in June 2018 to announce BFS Holdings, from Britain, and two other firms had signed a memorandum of understanding with the Government to establish a “fintech accelerator” and invest up to $10 million. The scheme has not been mentioned publicly by him since.
The Gazette asked Harbor/Chancery for the share register for Ocean Crest Partners, BFS Holdings and the three Permanent Capital companies but the information was not received by press time.
Companies House in the UK lists Catherine and David Waddicker, of Bury, England, as directors of BFS Holdings.
Mr Wolfberg, who sits on the board of the Bermuda Innovation and Technology Association and lives in New York State, told the RG: “Blockchain Triangle Systems Ltd is a wholly owned subsidiary of [Delaware-incorporated] Blockchain Triangle Systems Inc.
“Some notable investors … are the University of Michigan, [crypto firm] Algorand, [London-based private investment firm] Elbow Beach Capital, [venture capital firm] A100X, [and] angel investors with institutional backgrounds in private equity and long/short hedge funds.
“Management has an institutional background from both the buy-side and sell-side managing business lines for large global banks and starting and managing asset management firms.”
Blockchain Triangle calls itself a digital platform for climate and infrastructure assets. Its tech — which Mr Wolfberg said was patented and developed with the University of Michigan — enables investors to trade carbon credits by putting them on a blockchain.
Mr Wolfberg said he was Blockchain Triangle’s senior representative to the BMA and the DABA licence application process was “robust”, as was compliance.
He said Blockchain Triangle, which has developed a platform for trading carbon credits, using blockchain technology, was “currently employing or working with seven local Bermudians and has hired Bermudian interns to work with the company”, had offices at Innofund at 46 Reid Street and recently took part in the United Nations COP27 climate change conference.
We asked BMA chief executive officer Craig Swan if the regulator scrutinised Mr Sugarman’s financial past.
A BMA spokeswoman said it was not possible in law to share that information.
However, Section 12 of DABA requires applicants to adopt policies and procedures to meet certain obligations under the Act and the Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Regulations 2008.
The BMA rejects applications that have inadequate AML and ATF policies and procedures and there is no suggestion that Blockchain Triangle did not meet the criteria.
The spokeswoman said the BMA was “recognised for having high vetting and supervisory standards across all sectors and … a track record of evolving its regulatory frameworks and supervisory approaches to address evolution in the financial services sectors”.
