South Africa’s Ponzi kings – one dead, one behind bars

Two large Ponzi schemes and the men behind them – MTI’s Johann Steynberg and BHI Trust’s Craig Warriner – made headlines in 2024.

A Ponzi scheme is a fraud where investors are promised big profits at little or no risk. Rather than investing their money, the scam artist concentrates on attracting more investors. 

Initially, the scam looks legitimate because the initial investors get good returns. They typically spread the word because of the money they make.

However, a growing number of victims are needed to pay out the profits promised to investors. When the number of new investors slows, the scheme collapses.

Ponzi schemes have been around for decades, and South Africa has had its fair share of criminals fleecing victims using this method.

One of the most famous Ponzi schemes in the country was Adriaan Nieuwoudt’s Kubus scheme in the eighties.

The scheme involved people cultivating milk yeast cultures, which were sold to Nieuwoudt to receive money and the next batch to cultivate.

As part of the project and to keep it sustainable, the people also had to recruit new members to the Kubus scheme.

The scheme gained tremendous popularity and made headlines across newspapers and magazines. However, it was ultimately declared an illegal lottery.

Fast forward twenty years and Ponzi schemes continue to cost unsuspecting South Africans millions.

The hype around cryptocurrencies has created a fertile ground for fraudulent schemes and catching people with the promise of big returns.

Despite regular warnings from the Financial Sector Conduct Authority (FSCA) about Ponzi schemes, the lure of making money quickly is too much for many people to resist.

Two such schemes in which South Africans lost large amounts are Mirror Trading International and BHI Trust.

Both of these schemes were run by masterminds who duped thousands of South Africans into investing in their schemes.

Below is an overview of the two men and the destruction they left in their wake. 

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Johann Steynberg – MTI

Mirror Trading International (MTI), masterminded by Johann Steynberg, was a big pyramid scheme that lured investors with promises of high monthly returns on Bitcoin investments. 

It also functioned as a multi-level marketing scheme, incentivising participants to recruit others for additional bonuses. 

MTI attracted a global following and became the biggest such scheme ever operated in South Africa.

However, MTI’s house of cards began to crumble after financial regulators issued warnings and activist groups exposed vulnerabilities in the company’s website. 

MTI made headlines in September 2020 when a group calling itself Anonymous ZA exploited vulnerabilities in the scheme’s poorly-coded website.

Together with a MyBroadband investigative journalist and community members, the group exposed the inner workings of MTI.

Facing mounting pressure, Steynberg abruptly disappeared to Brazil in December 2020, leaving investors in the lurch.

Steynberg’s escape was shrouded in mystery, with some believing he absconded with investor funds and others speculating about foul play.  

Despite initial difficulties, Brazilian authorities eventually located Steynberg and arrested him for using false identification. 

He was convicted but received a relatively lenient sentence and even enjoyed a comfortable lifestyle under house arrest.

A further twist emerged when it was revealed that Steynberg had been living a lavish life in Brazil, including using a helicopter for travel. 

Court documents also showed he had purchased properties under false names and received assistance acquiring cocaine.  

However, his story came to an abrupt end when Steynberg reportedly died last month while under house arrest in Goiás.

According to a medical report leaked online, Steynberg suffered acute respiratory failure followed by sudden death due to a massive bilateral pulmonary thromboembolism.

The medical report noted that Steynberg was a chronic smoker.

MyBroadband reported that Steynberg’s lawyer, Thales Jayme, said the MTI mastermind had been facing a series of escalating mental health problems, including severe anxiety that may have led to panic attacks.

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Craig Warriner – BHI Trust

Craig Warriner used the BHI Trust to steal millions from South African investors in a fraudulent scheme similar to what Bernie Madoff used to defraud clients.

Warriner’s marketing message to his elite clientele was that he was an expert day trader who focused on two stocks – BHP Billiton and Anglo American.

He claimed to “understand their price movements so well that he was guaranteed to make small profits daily, which were immediately banked”.

Warriner is a St Stithians private school old boy, which gave him access to many wealthy people and good connections. He leveraged this to get many fellow old boys and parents to invest in the BHI Trust.

The scheme collapsed near the end of 2023, and Warriner surrendered to police and appeared in the Palm Ridge Magistrates Court in Katlehong, where he represented himself.

Initial reports suggested that 206 investors had suffered losses, but the true extent of the fraud seems to be much larger.

Fraud investigator Bart Henderson suggested that the actual losses could exceed R3 billion.

“The liquidators claim 800 victims and R1.6 billion in losses. However, many victims have not reported their losses due to lack of confidence in the liquidators or fear of having to repay previous payouts,” Henderson explained.

“This could easily push the total losses beyond R3 billion.”

Initially, details about Warriner, BHI Trust, and the scheme were sketchy. He had no social media presence, and his company was not well-known publicly.

Sasfin Securities’ David Shapiro explained that the case’s complexity means it will be difficult for those who have lost money to get it back.

Investors who have received distributions from Warriner over the last 15 years are also likely to have to return the money.

Some investors claimed that the BHI Trust, along with many other asset management companies with funds in the Trust, was registered with the FSCA. 

According to documentation seen by BizNews, the investor’s funds were held in a JSE Trust Account with a JSE-registered broker. 

However, the FSCA said in a statement at the time that neither BHI Trust nor Warriner are authorised as financial services providers or licensed as collective investment schemes managers.

It also said it is investigating other individuals linked to the scheme, and they weren’t licensed either.

Following an FSCA investigation of the conduct of the BHI Trust and Warriner from 7 February 2013 to 30 September 2023, the authority banned him from providing financial services.

The latest development in the case saw Warriner sentenced to an effective 25 years in jail.

The sentencing took place in the Palm Ridge Commercial Crimes Court on Monday, 27 May 2024, marking the end of a saga that has left hundreds of investors in financial ruin.

Warriner pleaded guilty to 207 counts of fraud, corruption, and practising without a financial services provider license in violation of the Financial Advisory and Intermediary Services Act.