Claims against BHI Trust balloon – and keep going – as Ponzi scheme unravels

Claims against the BHI Trust have topped R1.64 billion and the figure is growing as court-appointed trustees try to unravel what police believe was an elaborate Ponzi scheme run by Craig Warriner, a St Stithians College old boy who worked his former school network to stunning effect.

When investigators looked into BHI’s main Nedbank account, all they could find was R4.8 million.

Warriner handed himself over to police in October last year, admitting to police he had “used the funds of Peter to pay Paul” after getting smashed in the 2008 financial market meltdown.

He remains in Joburg’s ‘Sun City’ prison awaiting a bail hearing on 24 April. He was previously refused bail in a December 2023 hearing at the Palm Ridge Magistrate’s Court south of Johannesburg.

More than 800 defrauded in BHI Trust Ponzi scheme

Warriner previously admitted to authorities that he had defrauded roughly 220 people of R1.18 billion.

The latest figure from the court-appointed trustees is much bigger than that – R1.64 billion from 823 investors, and the figure is growing.

“These claims still need to be investigated by the trustees when the claims have been proven or admitted in terms of the relevant sections in the Insolvency Act,” says Gert de Wet, one of the court-appointed trustees. “Other claims are being received sporadically.”

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De Wet tells Moneyweb that the trustees have received certain undertakings for the payment of funds to the BHI Trust estate.

“The trustees are in the process of compiling letters of demand to various individuals and entities for payment to the BHI Trust estate.”

The 823 claims received by the trustees so far have been withdrawn as creditors may be required to make contributions in the future, according to minutes of the first creditors’ meeting on 10 April 2024. Last month, Warriner’s estate was finally sequestrated.

Commissions

One of the key sources of funds into BHI was investment advisory firm Global & Local, which reportedly received 5% commissions for directing funds to BHI.

This is well above the industry standard.

In November last year, Investec terminated its relationship with Global & Local and gave it 90 days to close all corporate cash manager accounts with the bank.

De Wet says the trustees are still investigating the flow of funds into BHI. “A Section 69 search and seizure warrant [under the Insolvency Act] was executed on 20 March at the offices of Global & Local, and the information seized is currently under discussion between the legal teams.”

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De Wet also tells Moneyweb that several more financial advisors will be subpoenaed to give testimony over their involvement in BHI. In November 2023, Global & Local wrote to clients advising them that it was as shocked as anyone else at the events surrounding BHI and had laid criminal charges against Warriner.

Forensic investigator Bart Henderson believes the reported losses of R1.64 billion by BHI clients may be a low-ball figure, and questions how much money is going unreported in the BHI scandal, and what has happened to the money. BHI funds appear to have found their way to a web of local and offshore companies, allowing the deception to continue for years after regulators were first alerted to possible irregularities.

‘Disgraceful’ apathy

Henderson slams the regulators for their apparent lack of interest in the BHI and other investment scandals going back over several decades such as Masterbond, Steinhoff and others.

“What the Ombud and the Financial Sector Conduct Authority [FSCA] are currently demonstrating, to compound this and add insult to the injury, is a seemingly disgraceful, patent level of apathy, lack of empathy, and seeming [lack of] interest in maintaining the rules of honesty and integrity in the regulatory affairs and oversight of the industry under their remit.”

In December, the FSCA said it was compiling a complete list of financial service providers that may have assisted their clients in investing in BHI Trust products and called on investors who knew or suspected their funds were being placed with BHI Trust to come forward with information.

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One of the intermediaries affiliated with BHI was Rubicon Administration Services, currently being wound down.

As Moneyweb previously reported, one of those raising concerns about BHI long before its collapse was Marc du Plooy, CEO of Wealth Associates, who suspected BHI was a Ponzi scheme and provided the FSCA with extensive documentation showing it was not registered with the regulator and yet was able to attract funds from other financial services providers (FSPs).

Warriner first investigated in 2013

At his bail hearing in December last year, Warriner told the court that he had been investigated by authorities several times in the past – in 2013, 2017 and 2020 – and each time cooperated. It appears nothing substantive came of these investigations.

Warriner told the court that he was “doing alright” as an equity investor until the financial crash of 2008, when he lost roughly half his clients’ capital.

He believed he could trade his way out of the deep hole he had created but ended up faking it for another decade and a half, using the funds of Peter to pay Paul, as he describes it himself.

This article was republished from Moneyweb. Read the original here